Are ProShares' New Leveraged Precious Metal ETFs Late to the Party?

Last week ProFunds debuted four new ETFs that provide short or leveraged exposure to gold or silver. Here are the details:

• Ultra Gold (UGL) - tracks the Gold Bullion price, London p.m. fix, 200% daily objective
• Ultra Short Gold (GLL) - tracks the Gold Bullion price, London p.m. fix, -200% daily objective
• Ultra Silver (AGQ) - tracks the Silver Bullion price, London fix, 200% daily objective
• Ultra Short Silver (ZSL) - tracks the Silver Bullion price, London fix, -200% daily objective

These ETFs use futures and forward contracts to deliver twice the daily performance of the underlying for the Ultra ETFs and twice the inverse of the underlying for the Ultra Short ETFs on a daily basis.

As was the case with the recent introduction of the Ultra Crude Oil (UCO) and the Ultra Short Crude Oil (SCO), these new ETFs are a bit late in being introduced. The weekly chart below shows that gold peaked way back in March of 2008. Investors would have been glad to have had that Ultra Short Gold ETF around to play that move.

On the other hand, there are many commentators and bloggers who are expecting gold to rocket higher as the U.S. government prints money and issues billions in Treasury bonds to support all the bailouts and stimulus packages. At that point, the Ultra Gold ETF will come in handy.

click to enlarge

Below we see a similar picture with respect to silver. It also peaked in March and it is unfortunate the Ultra Short Silver ETF was not available at that time.

It would seem that the Ultra Gold ETF (UGL) is being embraced by investors as volume seems to be growing nicely in the few days since the ETF was introduced. Given the economic backdrop, this particular ETF may indeed turn out to be a real winner.

Disclosure: none

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Comments

[Roger Knights:]

"On the other hand, there are many commentators and bloggers who are expecting gold to rocket higher .... At that point, the Ultra Gold ETF will come in handy."

That point arrived shortly today (Wednesday) before the SA site posted this article, with gold jumping to as high as $813. (It's currently $806, up about $32.)

2008 Dec 10 04:22 PM

[adan:]

i hope they all pick up in volumne, as i'm having trouble getting even a 100 ct order filled with prices well around it to qualify for fill

2008 Dec 11 10:00 AM

[Clifford:]

Do you mean late to the helicopter drop of inflationary money from the sky party to fight the shadowy demon that is "deflation!". No, they are either early, or right on time.

2008 Dec 13 02:12 AM

[palaceplace:]

ultras are the only way to go, if u guess right. check out the hi's and lo's over a 52 week period for QID,DXD,SDS,TWM,SMN,SR... ETC.
who needs vegas?

2008 Dec 24 03:15 PM