Investor Guide To Leveraged Precious Metal ETF Trading

leverage-decayThanks to the recent commodity strength, precious metals have rebounded from their lows and even moved higher. In fact, precious metals surged double digits from their three-year lows reached in late June. This incredible performance was mainly driven by improving global economic conditions.

The latest report from China shows that economic growth is now picking up after slowing down in the first half of the year while the euro zone finally emerged out of its six-quarter long recession in the second quarter. The U.S. is also growing at a faster clip with upbeat manufacturing data and an improving labor market.

Meanwhile, lower chances of the Fed tapering its monetary stimulus sometime soon and rising U.S.-Syria political tensions has led to a decline in the dollar that is boosting demand for the metals. Amid this uncertainty, the safe haven appeal for the precious metal has once again emerged leading to huge inflows into the space.

This trend is expected to continue at least in the near term. As a result, investors who are bullish on precious metals right now may want to consider going long on them. Fortunately, ETFs offer several options to investors to accomplish this task.

Below, we highlight a few of our favorite leveraged funds and some of the key differences between each (see: all the leverage commodity ETFs here).


Gold surged nearly 20% from its June low thanks to increased demand for jewelry, coins and bars. According to the latest data from the World Gold Council, the global demand for gold surged 53% in the second quarter, particularly from the top two consumers – India and China.

Further, the rising political instability in the Middle East (Syria) as well as fresh concerns on U.S. government debt of late has added bullishness to gold bullion. Investors looking to play this optimism in the yellow metal could choose from the following three leveraged ETFs:

ProShares Ultra Gold ETF (UGL)

This fund seeks to deliver twice (2x or 200%) the return of the daily performance of gold bullion in U.S. dollars; the gold price is fixed for delivery in London. The product makes a profit when the gold market moves upward and is suitable for short term traders in the space.

The product is expensive when compared to other geared options in the space though, charging 95 bps in fees a year. However, it is rich in AUM and average daily volumes with $192.9 million and roughly 211,000 shares, respectively.

PowerShares DB Gold Double Long ETN (DGP)

This ETN seeks to deliver twice (2x or 200%) the return of the daily performance of the DBIQ Optimum Yield Gold Index Excess Return, before fees and expenses. DGP initiates a long position in the gold futures market and has a relatively tight bid/ask spread with an average volume of roughly 332,000 shares per day.

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