Gold Is Shining: Go Long With These ETFs

Gold regained its sheen at the start of the year with investors shunning risky assets in favor of safe havens. This is especially true in the backdrop of the persistent slump in crude oil prices, the China rout and the continued bearishness in the stock market – conditions that are raising the safe haven appeal across the board.

In fact, gold bullion has gained nearly 4% in the year-to-date time frame and is easily outperforming the broad markets when compared to the losses of 9% for the S&P 500, 10.7% for Nasdaq, 9.5% for Dow Jones. Gold is trading above $1,100 per ounce at the time of writing with some forecasting bigger gains in the days ahead (read: Market Stings? 6 Techniques for a Winning ETF Portfolio).

Global Uncertainty on Rise  

The start of 2016 stirred up more chaos across the globe, intensifying fears of a global slowdown. China is not the only region to worry as other emerging markets like Brazil and Russia are also on the verge of collapse while a debt-laden Eurozone, recession in Japan and renewed tension in the Middle East are adding to the long list of woes.

Further, the recent slew of weak U.S. economic data including sluggish manufacturing numbers, weak retail sales data, weak consumer-price data, and disappointing housing data, reflects that the global slowdown has started to hurt the slowly recovering U.S. economy, making investors’ jittery. Apart from these, gold will likely get boost from the delay in the next rate hike, which now seems unlikely in March. If this happens, demand for gold will get a solid boost.

Further, the ultra-popular SPDR Gold Trust ETF (GLD - ETF report), with an asset base of around $23 billion and an average daily volume of around 6.2 million shares, has pulled in more than $557 million in capital in the initial weeks of 2016. While this might not seem like a huge number, investors should note that the fund topped the top 10 ETF creation list as per (read: Pain or Gain Ahead for Gold ETFs in 2016?).

Given these inflows and the concerns over global economic growth, the appeal of gold ETFs seems to be brightening. 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, this is quite easy as there are many options for accomplishing this task. Below, we highlight them and some of the key differences between each:

ProShares Ultra Gold ETF (UGL - ETF report)

This fund seeks to deliver twice (2x or 200%) the return of the daily performance of gold bullion in U.S. dollars; the gold price is fixed for delivery in London. The product makes a profit when the gold market moves upward and is suitable for hedging purposes against the rising gold prices. The product charges 95 bps in fees a year and has amassed $71.7 million in its asset base. Volume is light at under 35,000 shares per day. The ETF has gained 7.5% in the year-to-date time frame.

PowerShares DB Gold Double Long ETN (DGP - ETF report)

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Disclosure: None.

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