Gold's Bull Run Likely to Continue: ETFs to Add More Shine

Gold has been shining in recent months, with its price hitting a series of new all-time highs driven by increased geopolitical tensions, the possibility of a rate cut, Chinese economic woes and central bank buying. The bullion is up nearly 18% since mid-February to more than $2,350 per ounce, with many analysts expecting a bigger boost in the months ahead (read: Should You Buy Gold ETFs Now?).

Bank of America expects the yellow metal to climb to $3,000 per ounce by the next year. As a result, investors who are bullish on gold right now may want to consider a near-term long on the precious metal. Fortunately, with the advent of ETFs, there are several options in the leveraged gold and gold mining space to make quick profits, as these could see huge gains in a very short time frame compared to simple products.

These include ProShares Ultra Gold ETF UGL, DB Gold Double Long ETN DGP, Direxion Daily Gold Miners Index Bull 2X Shares NUGT, Direxion Daily Junior Gold Miners Index Bull 2x Shares JNUG and MicroSectors Gold Miners 3X Leveraged ETN GDXU.

Geopolitical Tension

Geopolitical tensions have been on the rise in the wake of the Russia-Ukraine war, the Israel-Hamas conflict and the increasing risks of China’s invasion of Taiwan. Gold is considered a store of wealth for investors. It is often used as a means of preserving wealth during times of financial and political uncertainty and usually does well when other asset classes struggle.

Likely Rate Cut

The Fed is expected to cut rates in June, fueling gold prices. This is because lower rates raise the yellow metal’s attractiveness when interest rates fall compared to fixed-income assets such as bonds as the precious metal does not pay interest like fixed-income assets.

Central Bank Purchase

Strong physical buying from the world’s central banks in a bid to diversify reserve portfolios due to geopolitical risks and purchases from investors in Asia have been a pillar of support. In fact, gold demand in China has increased substantially, with the nation’s central bank adding substantial volumes of bullion to its reserves, boosting holdings in each of the past 16 months (read: Gold About to Hit $2,500? ETFs to Play).

Further, gold buying has been gaining in popularity among the younger Chinese. India, the second-largest consumer of the metal, is also expected to see an increase in demand with rising consumer incomes as the economy continues to grow.

Below, we have provided a detailed analysis of the ETFs and some of the key differences between each:

ProShares Ultra Gold ETF (UGL)

ProShares Ultra Gold ETF seeks to deliver twice (2x or 200%) the return of the daily performance of the Bloomberg Gold Subindex. The product makes a profit when thegold marketmoves upward and is suitable for hedging purposes against rising gold prices. ProShares Ultra Gold ETF charges 95 bps in fees a year and has amassed $233.5 million in its asset base. Volume is good at around 128,000 shares per day.

DB Gold Double Long ETN (DGP)

This ETN seeks to deliver twice the return of the daily performance of the Deutsche Bank Liquid Commodity Index Optimum Yield Gold. DGP initiates a long position in the gold futures market, charging 75 bps in fees per year from investors. It has accumulated $99.3 million in its asset base and trades in an average daily volume of 6,000 shares.

Direxion Daily Gold Miners Index Bull 2X Shares (NUGT)

Direxion Daily Gold Miners Index Bull 2X Shares provides two times exposure to the daily performance of the NYSE Arca Gold Miners Index. It charges 87 bps in annual fees and has gathered $650.8 million in its asset base. Volume is heavy, with around 3 million shares exchanged per day, on average.

Direxion Daily Junior Gold Miners Index Bull 2x Shares (JNUG)

Direxion Daily Junior Gold Miners Index Bull 2x Shares provides 2X exposure to the daily performance of the MVIS Global Junior Gold Miners Index. It charges 85 bps in annual fees and has accumulated $318 million in its asset base. Volume is heavy, exchanging about 2 million shares per day on average.

MicroSectors Gold Miners 3X Leveraged ETN (GDXU)

MicroSectors Gold Miners 3X Leveraged ETN seeks to deliver three times the performance of the S-Network MicroSectors Gold Miners Index. It has amassed $293.8 million in its asset base and charges 95 bps in annual fees. MicroSectors Gold Miners 3X Leveraged ETN trades in an average daily volume of 1.2 million shares (read: 5 Top-Performing Leveraged ETFs of March).

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ProShares Ultra Gold (UGL): ETF Research Reports

Direxion Daily Gold Miners Index Bull 2X Shares (NUGT): ETF Research Reports

DB Gold Double Long ETN (DGP): ETF Research Reports

Direxion Daily Junior Gold Miners Index Bull 2X Shares (JNUG): ETF Research Reports

MicroSectors Gold Miners 3X Leveraged ETNs (GDXU): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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