Many people are calling for the end of the secular gold bull
market that started at the beginning of the last decade.
But even if you don't think gold's impressive run is over-up
more than 600 percent since the bear market bottom in 2000-you may
believe it's due for a further correction.
Either way, if you don't have the guts or the capacity to short
GLD outright, you have options.
Luckily, there are three products on the market that give you
inverse exposure to the yellow metal.
The PowerShares DB Gold Short ETN (NYSEArca:DGZ), the
PowerShares DB Gold Double Short ETN (NYSEArca:DZZ) and the
ProShares UltraShort Gold ETF (NYSEArca:GLL) all provide inverse
exposure to GLD, albeit in different ways.
DGZ is the only one of the three that gives you unlevered
inverse exposure to GLD.
DZZ and GLL, on the other hand, provide two times the inverse
exposure to GLD. Further, DZZ and DGZ are ETNs, while GLL is an
That means DGZ and DZZ, which are backed by Deutsche Bank, are
exposed to the credit risk of the issuer. In addition, DGZ and DZZ
are reset on a monthly basis as opposed to GLL, which is reset on a
In other words, GLL only promises its double leverage every day,
whereas DGZ and DZZ promise to provide their inverse exposures on a
So which approach is better?
Well, as always, it depends -on the market, the trend and to
some extent, the volatility of GLD.
Let's take a look at how well these funds have delivered on
their promises recently.
Here we have a chart of all three funds and GLD since Feb. 28,
when gold began its most recent decline.
During this period, all three funds underperformed their
promised leverage factors.
The combination of increased volatility and the absence of a
clear trend worked against all three funds, even the monthly
Interestingly, the underperformance of the two funds employing
monthly rebalances was less dramatic. It may be that the impact of
compounding took less of a toll on these funds relative to GLL.
Now let's take a look at a longer time frame, one in which GLD
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