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, or 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.
- Gold ETFs are traded heavily, with some average daily volumes exceeding 18 million shares traded.
- DUST and NUGT are by far the two most heavily traded gold ETFs.
- Gold remains a popular play especially during negative market conditions, as gold is a popular investment during market downturns considered its safe-haven appeal.
- Data updated November 8, 2019.
Gold Futures and Leveraged Funds
Other than buying physical gold, another way to gain exposure 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 a 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, mainly high volatility and expense ratios near 1%.
Direxion Daily Gold Miners Bear 3x ETF (DUST)
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 $362 million in total assets. The Direxion Daily Gold Miners Bear 3x ETF was trading on an average volume of 18.7 million shares per day in early November, 2019.
Direxion Daily Gold Miners Bull 3x ETF (NUGT)
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 NYSE ARCA Gold Miners Index on a daily basis. As a result of the trading volume popularity from the Gold Miners Bear 3x ETF, it's the second-most actively traded ETF, with more than 10.5 million shares traded daily in early November, 2019.
ProShares Ultra Gold ETF (UGL)
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. However, if you add the 3x emulated option of UGL listed by a separate company, VelocityShares, under the name VelocityShares 3x Long Gold ETN (UGLD), the volume of trading doubles.
Trading volume is also significantly lower than the two Direxion funds. The ProShares Ultra Gold ETF trades approximately 120,000 shares a day, while the 3x leveraged product owned by VelocityShares, UGLD, trades around 160,000 shares a day as of early November, 2019.
ProShares UltraShort Gold ETF (GLL)
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. Unlike to nearly $400 million of some of the other funds on this list, GLL has only $74 million under management.
The ProShares UltraShort Gold ETF trades approximately 34,000 shares daily as of early November, 2019.