Monster Gains In 2012: Leveraged Gold vs. Leveraged Silver

Precious metals have become increasingly popular in recent years, as continued easing from central banksaround the world and escalating fear over the global economy has led to a massive inflow for these commodities. Though most are comfortable with your standard bullion or ETF, others bet big on these assets by utilizing leveraged funds. Thus far in 2012, both leveraged gold and silver funds have performed extremely well, making them an enticing play for traders who can stomach the risk associated with these products [for more gold and silver news subscribe to our free newsletter].

Deutsche Bank AG (USA) (NYSE:DB)

Leveraged Gold

The two leveraged benchmarks on gold come from the Deutsche Bank AG DB Gold Double Long (NYSEARCA:DGP) and the VelocityShares 3x Long Gold ETN linked to the S&P GSC Gold Index (NYSEARCA:UGLD). DGP applies a 200% leverage while UGLD features a 300% exposure for those who really want to put their money where their mouth is. DGP has about $550 million in assets (a healthy amount for a levered fund) while the more dangerous UGLD has just $55 million. UGLD’s low asset base should come as no surprise as it is designed as a trading instrument rather than a fund that investors will buy and hold over the long term.

So far in 2012 DGP has tacked on a solid 24% while UGLD is up 32%; compare that to GLD’s current gainsof 13%. The first thing investors will note is that neither DGP or UGLD are perfect leverages of the performance of gold. This always comes off as frustrating, but you need to keep in mind that when an asset has volatile returns (as gold has a tendency to move a fair amount each day), leveraged funds tend to look out of whack, although they are performing perfectly in regards to their reset times [see also Ten Tell-Tale Signs You’re a Gold Bug].

It is important to look at the reset frequency of a leveraged product so you will know how it will react to movements of this metal. Looking at the long term performance of a daily leveraged product will be incomparable to the baseline, as it is only meant to replicate day-to-day movements. Note that there are monthly and even lifetime leverages for those who are truly interested.

Leveraged Silver

For silver, the ProShares Ultra Silver (NYSEARCA:AGQ) and 3x Long Silver ETN (USLV) reign supreme. AGQ employs a 200% leveraged and USLV a 300% leverage. AGQ is by far the largest leveraged commodity fund with more than $965 million in total assets, an extremely high number for a leveraged fund. USLV, not surprisingly, comes in a bit lower, but still maintains a healthy $125 million.

Thus far on the year, leveraged silver has ousted the gold competition with AGQ and USLV jumping 36% and 42% respectively. Compare this to SLV’s gains of 22% and it is clear that these funds have been stellar on the year. Note that silver is more volatile than gold, and its big movements on the year are what account for these two products not being perfect long-term replications with respect to their leverage.

This article was originally written by Jared Cummans, and posted on CommodityHQ.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!