Gold has outperformed major asset classes, but momentum is slowing and other metals are currently leading in 2025. I rate ProShares Ultra Gold ETF (UGL) a hold, citing risks of leveraged ETFs and gold's technical resistance at $3,500. Periods of high volatility and seasonality make UGL less attractive now; a breakout above $3,500 would improve the outlook.
Leveraged ETFs have a non-linear behavior, and their price may drift relative to the underlying. This article reports drift data for 22 of them. ProShares Ultra Gold ETF shows significant decay in the long term due to beta-slippage and contango.
Leveraged ETFs like ProShares Ultra Gold are risky during sideways or downtrending markets, with a high expense ratio of 0.95%. A critical period is approaching for gold due to a bullish U.S. dollar, rising Treasury yields. The spread between UGL and its unleveraged counterpart, such as SPDR® Gold Shares ETF, is widening and has reached a new high, indicating an overbought condition.
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The fund aims to achieve its investment goal by primarily engaging in various Financial Instruments including swap agreements, futures contracts, forward contracts, and option contracts, based on its benchmark index. It operates under normal market conditions and adjusts its investment strategies according to the discretion of the Sponsor. The fund is not designed to invest directly in commodities, instead, it focuses on derivatives and financial instruments that mirror the performance of its benchmark.