Gold ETFs for Risk-Tolerant Investors


"Gold's small movements don't present much daily opportunity, but several ETFs offer leveraged exposure."

Precious metals have without a doubt been the hottest corner of the commodity ETF market. Many investors with exposure to gold through ETFs are in it for the long haul. For traders focused on short-term profits, gold's relatively small movements do not present much of an opportunity. But for those willing to take on some additional volatility, there are several ETFs that offer leveraged exposure to gold.

Direxion Daily Gold Miners Bull 2x Shares (NUGT)

NUGT combines leverage achieved through investing in gold miners with the more traditional (and predictable) leverage achieved through the use of derivatives. The result is a product that can deliver big gains when gold prices jump and big losses when gold slides. [see also Gold Miner ETFs: Breaking Down All The Options].

FactorShares 2x Gold Bull/S&P 500 Bear (FSG)

Similar to NUGT, this ETF combines an investment strategy that often augments changes in the price of gold with the explicit use of derivatives, resulting in a fund that can post big swings in price over a relatively short period of time [see also How ETFs Have Democratized Investing].

Gold and large-cap U.S. equities often move in opposite directions, especially when stock markets encounter turbulence, thus amplifying gold's price movements. Because FSG leverages up this spread by a 2x target, this product can surge when gold prices increase and sink when gold declines.

ProShares Ultra Gold (UGL)

This ETF seeks to deliver daily results that correspond to 200% of the daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. As such, the its exposure is more predictable. Though mining stocks don't always move in lock step with spot gold, UGL will always move in the same direction as gold prices, though the leverage delivered may be less than the other products profiled above.

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