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Direxion to Close Triple Leveraged Bull Gold ETF

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It seems that Direxion’s luck with triple leverage gold ETFs is awful. After shutting down Direxion Daily Gold Bear 3x Shares ETF (BARS) in December 2014, the issuer now looks to cease operating Direxion Daily Gold Bull 3x Shares (BAR). It is worth noting that both ETFs were launched together but never lived up to expectations in asset accumulation (read: Direxion to Shut Down BARS, the 3x Gold Bear ETF).

The Direxion Daily Gold Bull 3X Shares ETF looks to offer a daily leveraged investment result that associates to thrice the daily performance of the Gold Benchmark Futures Contract. At the time of writing, BAR hoarded just $2.8 million in assets.

As per the issuer, “due to the fund’s inability to attract sufficient investment assets, it believes that the fund cannot continue to conduct its business and operations in an economically efficient manner.” The fund will stop trading on June 19, 2015.

Investors should also note that this ETF was not an old choice as it entered the market in April 2014. We presume the wobbly future of the gold bullion market is another the reason for the issuer’s decision.

Investors should not forget that the fund was steeply priced with 2.15% expense ratio which could be yet another reason for it not being able to attract enough investor attention. Notably, BAR was down over 24% in the last one-year period (as of May 29, 2015) and has lost about 2% in the year-to-date frame (as of the same date).

Unfavorable Macro Backdrop

Gold had a joyous ride since April on unexpected weakness in the greenback which was stirred up by lackluster U.S. economic data. But this short-lived northbound journey of gold came to a halt recently as the U.S. dollar once again took an upturn. Sound job and inflation data were behind this new-found optimism in the U.S. dollar as this made the case for an imminent Fed rate hike stronger (read: 4 Ways to Short the S&P 500 with ETFs).

Recently, the Fed pointed that it would normalize the interest rate policy if the economy continues to grow – though at a sluggish clip. Speculations are rife that this might lead the Fed to hike key rates in September. In any case, sooner or later the rates will be hiked this year giving a boost to the greenback. This in turn will weigh on the overall commodity investing along with gold. So, what could be a better time to close a triple leveraged bull gold ETF which was already under pressure (read: Is This the Safest Gold ETF for 2015?)?

Other Leveraged Gold Choices  

Investors still looking for leveraged gold ETFs having a bullish view on the yellow metal can have a look at ProShares Ultra Gold (UGL) giving twice the exposure of the performance of the gold bullion as measured by the U.S. Dollar and VelocityShares 3x Long Gold ETN (UGLD) seeking to provide long exposure to 3x the daily performance of the S&P GSCI Gold Index. UGLD charges much lower than BAR with 1.35% expense ratio and has amassed over $40 million in assets. On the other hand, UGL has gathered over $94 million in assets and charges 95 bps in fees (see all leveraged commodity ETFs here).

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