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Leveraged ETF Weekly Round-Up: Nat Gas, Gold Miners, India in Focus

Zacks Equity Research

Last week, the leveraged ETF world witnessed some different leaders and laggards as opposed to previous weeks which were heavy on India and Russia. Though these nations made their presence felt last week as well, natural gas and gold miners got the major focus. Let’s take a look at some top and worst performing leveraged/inverse ETFs last week to check the winners and dampeners in the market now (read: Leveraged ETF Roundup: Russia, India & Semiconductor Lead).

Top Performers Return Last Week
Daily Natural Gas Related Bull 3x Shares (GASL) 11.75%
Daily Gold Miners Bear 3x Shares (DUST) 10.19%
Long Extended S&P 500 TR Index ETN (SFLA) 7.26%
Worst Performers Return Last Week
Daily India Bull 2x Shares (INDL) -13.64%
               Daily Gold Miners Bull 3x Shares (NUGT) -11.09%
Daily Natural Gas Related Bear 3x Shares (GASX) -10.96%


Natural Gas ETFs in Focus

Natural gas ETFs gained this year massively thanks to the chilliest winter in decades that drove heating demand (and thus natural gas usage) higher. In fact, higher usage of natural gas has pushed the gas inventories to the lowest level in 11 years in April.

Though the supply scenario improved with the onset of milder weather, some analysts still believe that the expected growth in imminent natural gas supplies was being puffed up by several market experts.

Probably this was why GASL – a triple leverage fund on Natural gas – gained the most last week. GASL gives three times exposure to the ISE-REVERE Natural Gas Index on a single day. And for a valid reason, GASX – offering three times inverse exposure to the same index – was among the bottom three. GASX lost about 10.96% to become the third worst performing exchange traded product last week.

However, the backdrop has a high chance of changing  in the ongoing week as a recent Bloomberg study revealed that inventory build-up is steadily picking up and marketed gas production in 2014 will grow for the ninth consecutive year (as per EIA).

Gold Miners ETFs in Focus

Having caught many investors off guard, gold mining ETFs bounced back from their 2013 lows at the start of 2014 helped by the plunge in stock markets that led investors to seek refuge to safe haven assets like gold. Gold mining companies often trade as a leveraged play on gold, thus gaining or losing more than physically backed gold ETFs (read: The Best Gold Mining ETF for 2014).

However, last week was pretty appalling for gold mining ETFs as gold registered the biggest weekly drop since March as the S&P 500 index hit a new all-time high late-last week. With investors ignoring the contraction in the U.S. economy in Q1 and paying more attention to the signs of improvement in Q2, gold mining ETFs are presumably due for some pain.

As a result, DUST, which looks to follow the NYSE Arca Gold Miners Index to give 300% inverse exposure to the index, gained about 10.19% last week. And NUGT – which gives thrice the bull exposure to the same index – shed 11.09%.

S&P 500 Index in Focus

As discussed above, last week the S&P 500 index hit yet another all-time high, drawing investors toward it once again. SFLA – an ETN having triple leverage focus on the S&P 500 index – added about 7.26%. SFLA also charges a very low expense ratio of 35 bps a year which is quite low in the leveraged/inverse equity ETF space (read: Beat the Market with Fundamentally Strong ETFs).

India ETF in Focus

Finally, India ETFs came to a halt after weeks of astounding rally. Be it leveraged or non-leveraged, India ETFs were on fire in the recent past thanks to a change in government. The funds seem to have crossed their potential value and have now given in to profit-booking activities (read: Indian Elections Led to a Surge in These 3 ETFs).

INDL – which seeks to deliver thrice (3x or 300%) the daily performance of the Indus India Index, before fees and expenses – lost 13.64% last week, the worst fall in the leveraged equities ETF space.

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