Gold has long been considered a safe haven for investors looking to park their money in times of economic uncertainty. While holding physical gold has become less prevalent over time, investors can now gain easy exposure to gold through exchange-traded funds (ETFs) focused on both physical gold and gold mining companies. Gold is often a frequent target of market speculators looking to bet on short-term economic fluctuations. Volatility in the equity markets over the first half of 2016 has brought increased attention to investing in gold.
Another way to gain exposure to gold is through the use of futures contracts. Gold futures are often used for short-term, risk-hedging strategies and day trading, but rarely make ideal longer-term portfolio holdings. One of the key benefits of futures contracts is that they allow risk-taking investors the opportunity to get a lot of exposure to a particular asset at relatively low cost. There are dozens of ETFs that use futures contracts to gain double and triple the exposure to a specific asset, including gold.
ETF fund providers Direxion and ProShares specialize in leveraged fund products that cover a multitude of markets, sectors and assets. Therefore, it shouldn't be surprising that these providers manage the most actively traded leveraged gold ETFs in the marketplace. These leveraged gold funds come at a cost though. Due to the frequent trading and fund management necessary to achieve the funds' objectives, each of these funds charges an annualized expense ratio of nearly 1%.
Direxion Daily Gold Miners Bear 3x ETF
The Direxion Daily Gold Miners Bear 3x ETF (NYSEARCA: DUST) aims to deliver triple the inverse of the daily price performance of the New York Stock Exchange (NYSE) Arca Gold Miners Index. Launched in 2010, this fund has more than $400 million in total assets. Trading volume in this ETF has risen dramatically in 2016. Average daily volume in 2015 was around one million shares. During the three-month period ending June 27, 2016, the Direxion Daily Gold Miners Bear 3x ETF had traded nearly 18 million shares daily.
Direxion Daily Gold Miners Bull 3x ETF
The Direxion Daily Gold Miners Bull 3x ETF (NYSEARCA: NUGT) is essentially the opposite of the Gold Miners Bear 3x ETF and looks to provide investment results that triple the return of the NYSEARCA Gold Miners Index on a daily basis. From the fund's inception in 2010 through the first quarter of 2016, this fund was consistently the most actively traded leveraged gold ETF. As a result of the trading volume surge from the Gold Miners Bear 3x ETF, it's the second-most actively traded ETF, with more than 7 million shares traded daily.
ProShares Ultra Gold ETF
The ProShares Ultra Gold ETF (NYSEARCA: UGL) also uses futures contracts to achieve the investment objective of the fund. The fund looks to provide twice the daily performance of gold bullion. Although launched two years earlier than the Direxion funds, the Ultra Gold ETF hasn't caught on with investors in the same way. The fund had roughly $92 million in assets, as of March 31, 2016, which was far less than the $1.2 billion in assets of the Gold Miners Bull 3x ETF.
Trading volume is also significantly lower than the two Direxion funds. The ProShares Ultra Gold ETF trades approximately 50,000 shares daily.
ProShares UltraShort Gold ETF
The ProShares UltraShort Gold ETF (NYSEARCA: GLL) is designed for traders looking to short the gold market and aims to deliver twice the inverse of the daily performance of gold bullion. Like the Ultra Gold ETF, this fund is a relatively small player in this space. As of March 31, 2016, the fund had just $70 million in total assets under management.
The ProShares UltraShort Gold ETF trades approximately 30,000 shares daily.