Gold strategies offer all kinds of advantages and use cases for investors. From helping to ride out market volatility to capitalizing on gold miner momentum, they can play a powerful role in optimizing portfolio performance. Gold funds can also serve as excellent assets for leveraged and inverse strategies. As tactical tools, they help to capture the substantial performance swings that active investors are seeking.
Key Takeaways:
- ETNs and ETFs can use leveraged and inverse approaches to really add some oomph to portfolios.
- GDXU offers one example, a gold fund that has spiked 13% in July so far, per YCharts.
- As daily, tactical tools, those funds can deliver performance if used carefully.
The MicroSectors Gold Miners 3X Leveraged ETN (GDXU) is a keen example. The leveraged gold fund has already spiked 13% to start July, according to YCharts. GDXU charges a 95 basis point fee and tracks the S-Network MicroSectors Gold Miners Index. Designed for short-term tactical use, the ETN strategy provides 3x daily leveraged exposure to a market cap-weighted index that includes the VanEck Gold Miners ETF (GDX) and the VanEck Junior Gold Miners ETF (GDXJ).
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The Inverse Counterpart: GDXD
GDXU also has an inverse counterpart, the MicroSectors Gold Miners -3X Inverse Leveraged ETNs (GDXD). Charging the same 95 bps fee, the fund’s inverse approach provides returns inverse to the same underlying ETFs, GDX and GDXJ. With that, GDXU has seen the opposite return so far this month, down about 13%. The inverse version is designed as a tactical tool for adapting to market shifts.
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Together, the two funds can be effective tools for investors who want to actively adjust portfolios on a daily or near daily basis. Although gold is down 4% YTD, its slight uptick to start July has provided the momentum for GDXU’s rally.
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vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for GDXU and GDXD for which it receives an index licensing fee. However, GDXD and GDXU are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of GDXU and GDXD.
