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

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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 recently rose up nearly 18% since mid-February to more than $2,350 per ounce, with many analysts expecting to see a bigger boost in the months ahead.

Bank of America expects the yellow metal to climb to $3,000 per ounce by 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 - Free Report), DB Gold Double Long ETN (DGP - Free Report), Direxion Daily Gold Miners Index Bull 2X Shares (NUGT - Free Report), Direxion Daily Junior Gold Miners Index Bull 2x Shares (JNUG - Free Report), and MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report).

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 it 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.

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 ETFs to consider and some of the key differences between each.

ProShares Ultra Gold ETF (UGL - Free Report)

This fund 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. The ETF charges 95 bps in fees a year, and it has amassed $233.5 million in its asset base. Volume appears to be rather good, at around 128,000 shares per day.

DB Gold Double Long ETN (DGP - Free Report)

This ETN seeks to deliver twice the return of the daily performance of the Deutsche Bank Liquid Commodity Index Optimum Yield Gold. The ETN 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 it trades in an average daily volume of 6,000 shares.

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

This fund provides two times exposure to the daily performance of the NYSE Arca Gold Miners Index. It charges 87 bps in annual fees, and it 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 - Free Report)

This next ETF provides 2X exposure to the daily performance of the MVIS Global Junior Gold Miners Index. It charges 85 bps in annual fees, and it has accumulated $318 million in its asset base. Volume is heavy, as it exchanges about 2 million shares per day on average.

MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report)

Finally, this 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 it charges 95 bps in annual fees. The ETN trades in an average daily volume of 1.2 million shares.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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