Know What You’re In For With Leveraged Gold ETFs!

| June 2, 2015 | 1 Comment

goldLeveraged ETFs For Big Gold Gains!

If you put me on the spot, I would have to say gold has been the most talked about commodity over the past five years.

From its remarkable rally to $1,900 an ounce in 2011, to its spectacular downfall in April 2013- there has been plenty to discuss in regards to the yellow metal.

And now, with gold trading in the $1,200 area, there’s still a bevy of opinions as to where this market is headed next.

Some suggest the yellow metal is destined for much higher prices due to the extreme debt that’s propping up the US economy.  Of course, there are others who insist gold is a useless relic of a bygone age.

Who’s right?

We won’t get into that today.

However, we are going to discuss the leveraged ETFs allowing traders to profit from short-term price movements in the yellow metal.

As you may know, leveraged ETFs are one of the best ways for traders to rack up big gains in a short period of time.  By design, these products produce either 2X or 3X the daily performance of gold.

Now remember…

Leveraged ETF trading is best left to traders with unshakeable discipline.  If you’re unsure of your trading strategy, stick to basic gold ETFs.

And as I mentioned here, leveraged ETFs are for short-term trading only.  Over long periods of time (and especially in range-bound markets), these products tend to have substantial tracking errors.

Finally, it’s important to note that the leveraged ETFs we’re discussing today aren’t actually ETFs- they’re ETNs.  It’s important you understand the difference between these two products, so check out this article.

With that out of the way, here are the leveraged gold ETFs you can use for outsized profits- long and short.

Leveraged Gold Funds For Bulls…

Before I list the leveraged ETNs for gold bulls, let me warn you…

All the products listed below are thinly traded and therefore reserved for experienced traders!  

Not only will you have to deal with the inherent leverage of the products, but you’ll find a rather large bid/ask spread in most cases.  The spread will likely widen in periods of high gold market volatility.

Here are the 2X leveraged bullish gold funds…

  • DB Gold Double Long $DGP
  • Proshares Ultra Gold $UGL

And the 3X leveraged bullish gold funds… 

  • VelocityShares 3X Long Gold $UGLD
  • Direxion Daily Gold Bull 3X $BAR

Leveraged Gold Funds For Bears…

The low liquidity in the bullish gold ETNs above will also be found in the inverse leveraged funds below.  Remember, inverse funds trade the opposite of the market they track.  So when gold falls, the products below will rise.

Here are the 2X inverse leveraged gold funds…

  • ProShares UltraShort Gold $GLL
  • DB Gold Double Short $DZZ 

And now for the only 3X leveraged inverse gold fund… 

  • VelocityShares 3X Inverse Gold $DGLD

Should You Trade Leveraged Gold Funds?

While the products above will certainly give you more bang for your buck, they’re a dangerous way to play the gold market.  If there was more liquidity in them, I would feel different.

Bottom line…

If you’re an experienced trader, leveraged gold funds are a solid way to rack up big short-term profits.

But if you’re the least bit uncertain of your trading strategy, it’s best to steer clear of these illiquid offerings. 

Until Next Time,

Justin Bennett

BIO:  Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com.  With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them.  Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.

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Category: Commodity Trading

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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  1. don sytsma says:

    What about NUGT and JNUG??
    or do you not like those?

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