Exchange traded funds that profit from falling gold prices have seen trading volume increase as the precious metal tops $1,900 an ounce, a new record.
Investors can use these ETFs to speculate on gold pullbacks, or to hedge a long position in bullion.
Wells Fargo recently stated that the gold market is in a “bubble that is poised to burst” due to speculative demand. [Wells Fargo Warns on Gold Bubble]
Of course, trying to call a top in gold prices has been like standing in the path of a freight train in recent years. [The Contrarian: Short Gold with ETFs?]
Still, traders who want to make bearish bets against gold can tap exchange traded products such as PowerShares DB Gold Double Short ETN (NYSEArca: DZZ), ProShares Ultrashort Gold ETF (NYSEArca: GLL) and PowerShares DB Gold Short ETN (NYSE Arca: DGZ).
Some technical analysts note that gold is nearing key channel and Fibonacci resistance.
Some of these inverse gold ETFs employ leverage, which magnifies daily gains and losses. Leveraged and inverse ETFs are volatile and geared to short-term traders — the funds are not designed to be buy-and-hold investments.
ProShares UltraShort Gold lost more than 5% on Monday as gold futures rose and briefly traded over $1,900 an ounce.
SPDR Gold Shares (NYSEArca: GLD) has overtaken SPDR S&P 500 ETF (NYSEArca: SPY) as the largest ETF due to inflows and the climb in gold prices. The gold fund holds $76.7 billion in assets.
ProShares Ultrashort Gold
Chart source: StockCharts.com.
For more information on gold, visit our gold category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own GLD.