Time for Inverse Gold ETFs?

The year 2021 was downbeat for precious metals. Gold closed out 2021 with a loss of 3.6%, marking its biggest annual decline since 2015. Although precious metals are known as inflation-heading assets, gold failed to meet investors’ expectations last year despite a sky-high inflation rate. Reopening trade, fast economic growth, solid pent-up demand, a strong stock market, the rising greenback and chances of a hawkish Federal Reserve weighed on gold prices.

Although the year 2022 has been extremely downbeat for stocks, gold has not posted a blockbuster performance either. The biggest gold bullion ETF SPDR Gold Shares GLD is off 4% this year compared with a 11.8% decline in the S&P 500. Still, the yellow metal has gone a long way in protecting investors’ assets.

Investors will now be curious to know what lies in store for gold ETF investing for the rest of 2022. Let’s delve a little deeper.

Gold at Three-Week Low

Gold prices dropped for a sixth straight session to touch their lowest in more than three weeks due to a stronger dollar amid expectations of more rate hikes from the U.S. Federal Reserve to contain surging inflation, per Reuters article.

The dollar jumped to a more than one-month high against its rivals, making gold pricier for buyers holding other currencies. Benchmark 10-year Treasury yields are hovering around their highest level in a month, increasing the opportunity cost of holding non-yielding gold.

The Fed will likely hike rates by 50 basis points in September amid higher inflation and growing recession worries, according to economists in a Reuters poll. Traders are now pricing in around a 46.5% chance of a 75-basis-point rate hike in September and a 53.5% chance of a 50-bp increase following recent hawkish remarks from Fed officials.

Gold is highly sensitive to rising U.S. interest rates, as these raise the opportunity cost of holding non-interest-bearing bullion.

Inverse Gold ETFs

Against this backdrop, below we highlight inverse gold ETFs to gain some quick returns.

ProShares UltraShort Gold GLL – Up 3.1% Past Week (as Aug 19, 2022)

The ProShares UltraShort Gold seeks daily investment results, before fees and expenses, that correspond to twice the inverse of the daily performance of Bloomberg Gold Subindex. The underlying Bloomberg Gold Subindex is the procedure by which the price of Gold is set on the London market by five members of the London Gold Pool. The fund charges 95 bps in fees.

DB Gold Double Short Exchange Traded Notes DZZ – Up 3.4%

The DB Gold Double Short ETN provides investors with a cost-effective & convenient way to take a short or 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 fund charges 75 bps in fees.

DB Gold Short Exchange Traded Notes DGZ – Up 2.7%

The DB Gold Short ETN provides investors with a cost-effective & convenient way to take a short or 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 fund charges 75 bps in fees.

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SPDR Gold Shares (GLD): ETF Research Reports
 
DB Gold Double Short ETN (DZZ): ETF Research Reports
 
DB Gold Short ETN (DGZ): ETF Research Reports
 
ProShares UltraShort Gold (GLL): ETF Research Reports
 
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