Structural and electronic properties of the GdMg hydride switchable mirror have been studied with x-ray absorption fine structure (XAFS) spectroscopy at the Gd-${L}_{3}$ edge. The analysis of the extended XAFS (EXAFS) data show phase segregation in the as-deposited film. The phase separation is enhanced by hydrogen intercalation. The structure of both the gadolinium clusters with low hydrogen concentration and the hydrogen-loaded gadolinium trihydride clusters is found to be hcp. EXAFS detected hydrogen atoms as scatterers, in a highly ordered structure. The structure of the gadolinium trihydride cluster is consistent with the model in which the hydrogen atoms are shifted from octahedral positions to the metal plane. The intensity of the Gd ${L}_{3}$ x-ray absorption edge increases after loading with hydrogen, pointing to a higher number of holes in the d-valence band. This suggests that a fraction of the available charge is transferred to the hydrogen atoms. This charge transfer is thought to be responsible for the optical change of the gadolinium thin film.