How to Go Super Long or Short on Gold: UGLD, GLL & DGZ

We recently added the VelocityShares 3x Long Gold ETN (NYSEARCA: UGLD) to our SmallCap Network Elite Opportunity (SCN EO) portfolio not necessarily because we have turned into gold bugs while the ProShares UltraShort Gold ETF (NYSEARCA: GLL) and Deutsche Bank AG DB Gold Short ETN (NYSEARCA: DGZ) offer investors an easy way to make a bearish bet on gold without having to resort to dabbling directly in futures.

How To Go Super Long on Gold With UGLD

The VelocityShares 3x Long Gold ETN seeks to provide long exposure to three times (3x) the daily performance of the S&P GSCI Gold Index ER plus a daily accrual equal to the return that could be earned on a notional capital reinvestment at the three month US Treasury rate. More specifically, the ETN uses futures contracts to track the gold portion of the S&P GSCI Index which is tracks a world production-weighted basket of non-financial commodities.  

In other words and of you really really really are a gold bug, the VelocityShares 3x Long Gold ETN is the way to go. However, the ETN is also down 53.2% since the start of the year, down 48.5% over the past year and down 62.4% since February 2012.

Nevertheless, we added the VelocityShares 3x Long Gold ETN in the belief that gold is ripe for at least a dead cat bounce – especially if rates rise and/or the dollar falls again.

How to Short Gold the Easy Way GLL & DGZ

The ProShares UltraShort Gold ETF seeks daily investment results corresponding to two times the inverse (-2x) of the daily performance of gold bullion as measured by the US Dollar fixing price for delivery in London while the Deutsche Bank AG DB Gold Short ETN is based on a total return version of the Deutsche Bank Liquid Commodity Index Optimum Yield Gold, which is intended to track the short performance of a single unfunded gold futures contract. This means that either GLL (if you want a leveraged investment with augmented returns or risk) or DGZ (if you don't want the extra risk associated with leverage).

The ProShares UltraShort Gold ETF is up 38.5% since the start of the year, up 23.1% over the past year and up 81% since September 2008 while the Deutsche Bank AG DB Gold Short ETN is up 19.4% since the start of the year, up 13.4% over the past year and down 43.8% over the past five years. Here are the latest technical charts for both the ProShares UltraShort Gold ETF and the Deutsche Bank AG DB Gold Short ETN:

Share Performance: UGLD vs. GLL & DGZ

Finally, here is a quick look at the performance of the VelocityShares 3x Long Gold ETN verses the ProShares UltraShort Gold ETF and the Deutsche Bank AG DB Gold Short ETN over the past two years or so:

As you can see, the gold bugs have been losers at least for this year. Nevertheless, there might be space in your portfolio for the VelocityShares 3x Long Gold ETN as well as the ProShares UltraShort Gold ETF and the Deutsche Bank AG DB Gold Short ETN depending on what your time horizon is for the direction of gold.

SmallCap Network Elite Opportunity (SCN EO) has an open position in UGLD. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.