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Leveraged Gold ETFs to Play on Russia-Ukraine Tensions
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Gold prices have been upbeat this year with SPDR Gold Shares (GLD - Free Report) adding 3.8% so far as against the 9.7% decline in the S&P 500 (as of Feb 22, 2022). The yellow metal has been gaining prominence as rising rate worries and geopolitical tensions have rattled the global markets and boosted a safe-haven rally lately.
People view precious metals as a sign of wealth. Investing in precious metals like gold ensures safety of your money by not being reliant on a bank or business performance.
Russia-Ukraine Tensions to Boost Gold
Chances of Russian incursion into Ukraine are hitting headlines for quite a few days now. Putin announced on Feb 22 that he would recognize the independence of Donetsk and Luhansk and signed a decree calling for forces to enter the two regions, per a CNBC article.
This marred hopes of a diplomatic resolution for tensions between Russia and Ukraine. U.S. President Biden publicly called Russia's move to deploy troops to separatist regions of Ukraine "the beginning of a Russian invasion" of the region.
The United States also announced the first tranche of sanctions on Russian financial institutions, sovereign debt and wealthy individuals. On Tuesday, U.S. Secretary of State Antony Blinken also said he has called off a meeting with his Russian counterpart, Foreign Minister Sergei Lavrov.
European foreign affairs ministers are also meeting in Brussels to discuss the EU’s next steps. United Kingdom already announced first batch of Russia sanctions, targeting banks and oligarchs in the country. Germany too halted the approval of the gas pipeline Nord Stream 2 after Russia’s actions.
Risk-on assets have slumped this week with the S&P 500 entering into the correction territory. And safe-assets like gold are likely to stay strong due to higher safe-haven demand.
Rising Inflation: Gold's Friend?
U.S. inflation is red-hot. The annual inflation rate in the United States accelerated to 7.5% in January of 2022, the highest since February of 1982 and well above market forecasts of 7.3%. Notably, gold is also viewed as an inflation-hedging asset.
Against this backdrop, below we highlight a few leveraged gold ETFs that can be played as long as the trend remains investors’ friend.
The ProShares Ultra Gold seeks daily investment results, before fees and expenses, that correspond to two times (2X) the daily performance of the Bloomberg Gold Subindex. The expense ratio of UGL is 0.95%.
DB Gold Double Long Exchange Traded Notes (DGP - Free Report)
The DB Gold Double Long ETN provides investors with a cost-effective & convenient way to take a leveraged view on the performance of gold. It is based on a total return version of the Deutsche Bank Liquid Commodity Index Optimum Yield Gold. The expense ratio of DGP is 0.75%.
Bottom Line
As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures. Still, for ETF investors who are bullish on thegold bullion for the near term, either of the above products can be an interesting choice.
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Leveraged Gold ETFs to Play on Russia-Ukraine Tensions
Gold prices have been upbeat this year with SPDR Gold Shares (GLD - Free Report) adding 3.8% so far as against the 9.7% decline in the S&P 500 (as of Feb 22, 2022). The yellow metal has been gaining prominence as rising rate worries and geopolitical tensions have rattled the global markets and boosted a safe-haven rally lately.
People view precious metals as a sign of wealth. Investing in precious metals like gold ensures safety of your money by not being reliant on a bank or business performance.
Russia-Ukraine Tensions to Boost Gold
Chances of Russian incursion into Ukraine are hitting headlines for quite a few days now. Putin announced on Feb 22 that he would recognize the independence of Donetsk and Luhansk and signed a decree calling for forces to enter the two regions, per a CNBC article.
This marred hopes of a diplomatic resolution for tensions between Russia and Ukraine. U.S. President Biden publicly called Russia's move to deploy troops to separatist regions of Ukraine "the beginning of a Russian invasion" of the region.
The United States also announced the first tranche of sanctions on Russian financial institutions, sovereign debt and wealthy individuals. On Tuesday, U.S. Secretary of State Antony Blinken also said he has called off a meeting with his Russian counterpart, Foreign Minister Sergei Lavrov.
European foreign affairs ministers are also meeting in Brussels to discuss the EU’s next steps. United Kingdom already announced first batch of Russia sanctions, targeting banks and oligarchs in the country. Germany too halted the approval of the gas pipeline Nord Stream 2 after Russia’s actions.
Risk-on assets have slumped this week with the S&P 500 entering into the correction territory. And safe-assets like gold are likely to stay strong due to higher safe-haven demand.
Rising Inflation: Gold's Friend?
U.S. inflation is red-hot. The annual inflation rate in the United States accelerated to 7.5% in January of 2022, the highest since February of 1982 and well above market forecasts of 7.3%. Notably, gold is also viewed as an inflation-hedging asset.
Against this backdrop, below we highlight a few leveraged gold ETFs that can be played as long as the trend remains investors’ friend.
ETFs in Focus
ProShares Ultra Gold (UGL - Free Report)
The ProShares Ultra Gold seeks daily investment results, before fees and expenses, that correspond to two times (2X) the daily performance of the Bloomberg Gold Subindex. The expense ratio of UGL is 0.95%.
DB Gold Double Long Exchange Traded Notes (DGP - Free Report)
The DB Gold Double Long ETN provides investors with a cost-effective & convenient way to take a leveraged view on the performance of gold. It is based on a total return version of the Deutsche Bank Liquid Commodity Index Optimum Yield Gold. The expense ratio of DGP is 0.75%.
Bottom Line
As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures. Still, for ETF investors who are bullish on thegold bullion for the near term, either of the above products can be an interesting choice.