Gold Dazzles: Amplify Returns With Leveraged ETFs
Gold is firing on all cylinders, touching a series of new highs. The bullion topped $3,300 per ounce for the first time in history after reaching $3,200 last week, reflecting its role as a refuge in turbulent times. With the ongoing tariff chaos, growing inflation fears, uncertain global economic growth, and the prospects for more aggressive policy easing by the Fed, the precious metal's allure remains powerful. A weakening U.S. dollar, which is at its lowest level since April 2022, is also driving the strong rally.The combination of factors suggests that the bullish trend in the yellow metal is here to stay. Investors seeking to tap this moment 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.Here, we have discussed the reasons:Trade TariffsPresident Donald Trump’s tariff policies have sparked fears of a global trade war and heightened concerns about a potential economic slowdown. Though Trump halted the "reciprocal" tariffs for 90 days on some 75 countries, his administration escalated a trade war with China, increasing levies to 145%. The move will continue to fuel gold demand as a safe haven (read: ETFs Surge on US Stocks' Best Week Since 2023: What's Next?). Gold is often used to preserve wealth during financial and political uncertainty and usually does well when other asset classes struggle. Additionally, the inflationary pressure caused by new tariffs will benefit the precious metal's status as a hedge against rising prices.Potential for Aggressive Fed EasingExpectations of faster-than-anticipated Federal Reserve rate cuts have further fueled gold’s rally, lifting the related ETFs. With recent data showing a broad cooling of U.S. inflation in March, traders are now anticipating three rate cuts this year, with the possibility of a fourth. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, increasing its attractiveness over fixed-income investments such as bonds. Weakening DollarGold’s rally is also buoyed by a weaker dollar. Notably, the U.S. Dollar Index, which measures the U.S. dollar against a basket of global currencies, has declined more than 4.3% since the start of the month and is on track to have its worst two-month stretch since 2002.Central Bank BuyingCentral banks have been consistently buying gold for decades. According to the latest report from the World Gold Council, global gold demand reached a record high in 2024, driven by sustained central bank buying and growth in investment demand. Central banks accumulated more than 1,000 tons of gold for the third consecutive year. In particular, China extended its purchases for the fifth consecutive month in March. Solid ETFs Flow Gold ETFs saw an inflow of 226.5 metric tons worth $21.1 billion in the first quarter, representing the largest quarterly inflow in three years in the first quarter, according to data from the World Gold Council (WGC). In dollar terms, ETF inflows surged to $21.1 billion in the first quarter, their highest level since the second quarter of 2020, when markets were battered by the COVID-19 pandemic.Analysts Going BullishAnalysts at Goldman Sachs and UBS issued optimistic forecasts for gold, citing strong central bank demand and the metal's capacity to hedge against geopolitical risks and economic downturns. Goldman lifted its gold price target from $3,300 to $3,700 an ounce by year's end and to $4,000 by mid-2026. UBS forecasts a price of $3,500 an ounce by December 2025. Analysts at Bank of America recently raised the target price on gold to $3,500 per ounce from $3,000 over the coming 18 months, while Macquarie Group predicts the precious metal to touch $3,500 in the third quarter of this year.ETFs to PlayBelow, 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 the gold market moves 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 $522 million in its asset base. Volume is good at around 531,000 shares per day (read: Why Investors Should Rush to Gold ETFs?). 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 $164.9 million in its asset base and trades in an average daily volume of 30,000 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 86 bps in annual fees and has gathered $550 million in its asset base. Volume is heavy, with around 2 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 $317.5 million in its asset base. Volume is heavy, exchanging about 724,000 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 $594.4 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 822,000 shares.Bottom LineIt is clear that buying pressure has been intense for gold and that the recent trend is extremely favorable for the commodity, given the flight to safety and central bank purchases. Additional buying could be in the cards if the imposition of tariffs turns into a trade war. However, investors should note that since the above-mentioned products are extremely volatile, they are suitable only for traders and those with high-risk tolerance. Additionally, daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures (see: all the Leveraged Commodity ETFs here).Still, for ETF investors who are bullish on gold for the near term, either of the above products could be an interesting choice. A near-term long could be intriguing for those with high-risk tolerance, and a belief that the “trend is the friend” in this corner of the investing world.Want key ETF info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report 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 ReportsThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks
Quelle: Zacks
