A Look At The Short Gold ETF Superstar (DUST, DGZ, GLD, IAU)
Christian Magoon: The only short gold ETF that has gained ground this year is the Direxion Daily Gold Miners Bear 3x Shares (NYSEARCA:DUST). DUST has managed to achieve gains of over 6% by tracking the 3x inverse daily performance of the NYSE ARCA Gold Miners Index. Here’s the performance chart of all inverse and leveraged gold ETF and ETNs in 2012.
DUST is the best short gold ETF in 2012.
As the only short gold ETF focusing on gold stocks, DUST has taken advantage of the poor performance of gold miners versus the price of gold. In contrast the DB Short Gold ETN (NYSEARCA:DGZ), has lost over 4% as the price of gold has been mostly positive this year.
DUST’s 3x daily leveraged approach has only been rewarded with $22 million of assets. This is surprising as DUST has been the best overall performing gold ETF in 2012. In addition over the last year DUST has gained 20% more than the next closest gold ETF or ETN. Clearly the short gold ETF approach DUST offers provides value. Here’s the top 10 performing gold products ranked by one year performance from the gold ETF list on GoldETFS.biz.
Three short gold ETF funds lead in performance over the last year.
Note in the chart above that the three best performing products over the last year are short gold ETF products from PowerShares DB and Direxion. In addition while these products are all positive, the two largest gold ETF products, (NYSEARCA:IAU) and (NYSEARCA:GLD), have both lost close to 8% of their value.
Short gold ETF products are often ignored by investors as they may employ leverage and seek to profit on the daily declines in a metal or group of stocks that have been on a 10 year run. However, using a short gold ETF in limited circumstances may act as an attractive hedge against the drops gold stocks and gold have frequently experienced over the last year. Short gold ETF products can easily be used improperly due to a basic lack of understanding of how the products work. However a careful examination of the prospectus and educational material on Sponsor websites may position some investors to feel comfortable using short gold ETFs as portfolio hedges.
Christian Magoon is Publisher of GoldETFs.biz and IndiaETFs.com. He is also CEO of Magoon Capital, a strategic consultant firm to asset managers. Christian Magoon is an ETF insider, having launched over 40 ETFs in the United States to date. A widely recognized thought leader on finance and market issues, Christian regularly contributes to many financial media outlets. Prior to forming Magoon Capital in 2010, Christian was President of Claymore Securities (now Guggenheim Investments), where he built one of the fastest growing and most innovative ETF businesses in the country, gathering more than $3 billion in AUM in three years. He launched more than 40 ETFs, introducing many “firsts” to the U.S. market, including the first Frontier Markets, Sector Rotation, Solar Energy, Timber, BRIC and suite of China focused ETFs. Christian consistently provides his industry insights and knowledge as a commentator in the U.S. media speaking publicly on macro investment issues and ETF related topics. Follow him on Twitter @ChristianMagoon. In 2008, he was named by Institutional Investor News as one of the five people to watch in the U.S. ETF marketplace. In 2011, Financial Planning magazine dubbed Christian an “ETF Pioneer.”