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Despite a recent reversal, the price of gold is up 68% in the past year—and the price of shares of some gold mining companies has risen at an even faster rate.
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Investors willing to accept a high degree of risk in exchange for the potential to magnify single-day gains in gold or gold mining stocks might consider a leveraged ETF or ETN.
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Both 2x and 3x leveraged exposure is available via products such as SHNY, GDXU, and JNUG, although these are designed for experienced investors and remain highly speculative investments.
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Interested in MicroSectors Gold 3x Leveraged ETN? Here are five stocks we like better.
A sudden reversal in the precious metals rally has left investors scrambling to once again reassess how gold should fit into their portfolios.
Still, despite the per-ounce price plunging hundreds of dollars from an all-time high of around $5,600, gold is still up 68% over the past year—and the first days of February have also brought a moderate recovery from the recent dip as well.
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One thing seems to be certain: No matter which way the price of gold moves in the near term, investors should expect it to do so in a highly volatile manner. Given that scenario, it is possible to achieve outsized returns beyond what one might accomplish by simply holding physical gold or shares in gold mining stocks by targeting exchange-traded funds (ETFs) or similar products employing a leveraged approach.
All leveraged exchange-traded products (ETPs) carry a high degree of risk and are not appropriate for many investment strategies. Still, the following three funds may stand out to investors willing to make a big bet on gold.
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One of a number of gold-focused leveraged products, the MicroSectors Gold 3X Leveraged ETNs (NYSEARCA: SHNY) is an exchange-traded note (ETN) targeting the price of gold bullion. It offers 3x daily leverage, meaning that it aims to triple daily returns of the price of gold. However, losses are similarly amplified 3x.
SHNY achieves its goal not by investing in physical gold directly but by providing a leveraged play on the SPDR Gold Shares ETF (NYSEARCA: GLD), an ETF holding stores of gold bullion in vaults and one of the most popular access points for investors interested in the precious metal.
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This SHNY is a more extreme approach to a leveraged physical gold play due to its 3x leverage. This makes it appropriate for investors highly confident in a short-term, single-day price increases in gold. For those seeking a slightly more moderate risk/reward profile, an alternative leveraged ETN—the DB Gold Double Long ETN (NYSEARCA: DGP)—provides 2x leveraged exposure to gold futures.
