The iShares Gold Trust’s (NYSEArca: IAU) assets jumped 6.7 percent last month, while those of the SPDR Gold Shares (NYSEArca: GLD) fell 1.3 percent in February, suggesting IAU’s cheaper expense ratio may be giving it the upper hand among some investors.

IAU gathered $341 million in new money in February, lifting its assets to $5.38 billion, while GLD suffered outflows of $712 million. Moreover, the ETF Securities Physical Swiss Gold ETF (NYSEArca: SGOL) gathered $95.6 million last month, increasing its assets to $1.24 billion, according to data compiled by IndexUniverse.com.

To be sure, GLD remains the dominant physical gold ETF, with its $55.33 billion in assets as of March 3, making it the world’s second-biggest ETF. But ever since iShares cut the expense ratio on IAU last summer by more than a third, it has gained ground on GLD. IAU costs 0.25 percent a year, compared with GLD’s 0.40 percent a year and SGOL’s 0.39 percent.

In all of 2010, IAU’s assets jumped $1.62 billion, or 43.7 percent, almost four times the rate of GLD’s asset growth. Again, because GLD is so big, the $5.82 billion it gathered last year was more than all of IAU’s year-end assets of $5.32 billion.

“There have been some wholesale swaps out of GLD and into IAU,” said Paul Weisbruch, an ETF trader at King of Prussia, Pa.-based Street One Financial. “Why are they doing it? It’s strictly expense-ratio related.”

We’ve written about this potential sea change in the physical gold ETF market before, including one story in the immediate aftermath of the iShares price cut, titled “Did IAU Just Steal $59 Million From GLD” when the flows out of GLD matched up almost exactly with the flows into IAU.

Tax Hurdle

However, given gold’s decade-long bull run, it may be difficult—if not unimaginable—for longtime holders of GLD to sell their holding for fear of ending up with a large tax bill.

GLD, which is taxed as a collectible at a 28 percent rate, has more than tripled in price in the past 10 years. It’s risen another 6 percent in the past month amid anxiety that violence in Libya may tighten oil supplies at a time of growing demand from developing economies such as China and India.

“There are some long-term holders that may be thinking: ‘I don’t want to generate a taxable event.’ It’s as simple as that,” Weisbruch said. “That may actually be an obstruction to more assets moving from GLD to IAU,” adding that may be a reason why GLD’s sponsor, State Street Global Advisors, isn’t in any rush to lower its ETF’s expense ratio.

He said those investors who do take the leap from GLD to IAU because of the lower costs may not be as tax sensitive or may not be longtime holders of the GLD.

And for those who want to buy on the dips when gold corrects downward as it did in January by almost 7 percent, there’s every reason for investors looking to add gold to buy a cheaper fund when buying opportunities arise.