DataTrader: Ultra Gold Leads the Precious Metals Pullback

Investor fascination with commodities has dovetailed almost perfectly with the rise of exchange-traded funds over the past decade. This “you got your commodities in my ETFs” (or is it “you got your ETFs in my commodities”?) combination has helped create a slew of ways for active equity investors and traders to take advantage of potential opportunities beyond the stocks of the S&P 500 or Nasdaq or Russell 2K.

In recent days, the ProShares Ultra Gold ETF (UGL) has been an example of this kind of exchange-traded fund. Unlike other gold-related ETFs like the Market Vectors Gold Miners ETF  (GDX), UGL is built to mimic the price movement of gold itself, rather than the share prices of gold mining companies (actually, to be more specific, UGL is designed to copy two times the daily return of gold bullion).

This is important. There are instances in which gold and gold mining stocks move in tandem. But there are other instances when the correlations between the two are not as strong. Because of this, traders and investors should always check to make sure the exchange-traded fund they are considering will track what they want the ETF to track.

Why bring up the UGL? Not only is the UGL a good example of the marriage between commodities and ETFs, but also the fund has been pulling back toward levels from which, historically speaking, it has tended to make significant short term gains. In fact, shares of UGL retreated to similar levels as recently as late September, shortly before rallying by more than 7% into mid-October.

Down four in a row ahead of trading on Friday, UGL pulled back by more than 2% in Thursday’s session to finish in technically oversold territory for a second day in a row.

Quantified data and research on stocks like UGL is available each evening after the market close. To learn more, click here.

David Penn is Editor in Chief of