Gold's 8% monthly drop sent UGL down 17% and GLL up 18%, showing the funds' opposing leveraged theses cut sharply in different directions.
GLD's 115% five-year gain exposes leverage decay, given that UGL returned 186% over the same stretch, which falls well short of a clean double.
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ProShares Ultra Gold (NYSEARCA:UGL) and ProShares UltraShort Gold (NYSEARCA:GLL) look like mirror images of the same trade, and in one sense they are. Both deliver 2x daily leveraged exposure to the Bloomberg Gold Subindex, one long and one short. But treating them as interchangeable tactical tools misses the point. Each fund embeds a specific macro thesis, and the past 12 months show exactly how differently they behave when gold turns.
UGL is a bet that real yields fall, the dollar weakens, or inflation surprises to the upside. Its 20.84% one-year gain maps directly to GLD's 18.39% run over the same window, roughly the doubled exposure the fund promises on a daily basis.
GLL takes the opposite side. It profits when real rates climb, the dollar rallies, or risk-on flows drain gold's haven premium. With the 10-year TIPS real yield at 2.35% and the nominal 10-year Treasury at 4.55%, sitting in the 94th percentile of its 12-month range, gold has faced structural pressure. That environment has crushed gold bulls holding leverage and rewarded the inverse trade in short bursts.
The recent gold pullback is a clean case study. GLD dropped 8.22% over the past month and 7.91% year to date. UGL amplified that decline to a 16.64% one-month loss and a 22.93% YTD drawdown. GLL, meanwhile, gained 18% over the past month while posting a 5.05% YTD return.
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Zoom out and the leverage decay story becomes obvious. Over five years, GLD returned 115.43%. UGL, the 2x long, returned 186.22%, well short of a clean double because of daily rebalancing costs during choppy periods. GLL, the 2x short, lost 79.26% and 90.08% over 10 years. Holding either fund through a trending market punishes the wrong side, and holding either through a sideways market punishes both.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
