Feb 19 (Investopedia) —  There are a limited number of leveraged exchange-traded funds that track the metals and mining sector. Investors utilize leveraged exchange-traded funds in this sector with caution because the prices of precious metals are typically volatile. Its not uncommon to see price swings of 20% to 30%, up or down, in prices relating to the metals and mining sector.

An exchange-traded fund (ETF) is a type of investment fund that can be traded like stocks on stock exchanges and holds assets like commodities and bonds. ETFs tend to track an index (such as the Nasdaq) and are of interest to investors due to their similarity to stocks and their low transaction costs. ETFs allow for the diversity of an index fund and the possibility of selling short and buying on margin. A leveraged ETF is a specialized type of ETF that seeks to glean an amplified return from price changes. ETFs are often designated as being either bull- or bear-oriented.

LEVERAGED ETFS IN THE METALS AND MINING SECTOR

ProShares Ultra Gold ETF (UGL) is a 2x leveraged ETF that attempts to mimic two times the daily performance of gold bullion, measured by the daily London closing price quoted in U.S. dollars.

ProShares UltraShort Gold ETF (GLL) is precisely the opposite of ProShares Ultra Gold. This fund seeks a daily investment that is twice the inverse of the daily performance of gold bullion.

ProShares Ultra Silver ETF (AGQ) is similar to its counterpart exchange-traded fund that tracks the price of gold. This ETF also uses the U.S. dollar quote price and attempts to provide a daily investment result that is twice (or 200%) the daily performance of silver in the market.

The PowerShares DB Precious Metals ETF (DBP) is based on the DBIQ Optimum Yield Precious Metals Index Excess Return. The ETF follows this weighted index, which is made up of futures contracts of both gold and silver. The PowerShares ETF is designed to imitate the performance of theprecious metals sector overall, but it has a specific focus on gold and silver.

The ETFS Leveraged Precious Metals ETF is a fund that follows the Dow Jones AIG Commodity Index Precious Metals subindex, and it is traded on the London Stock Exchange. This ETF changes value daily based on the daily percentage change of the subindex. The ETF is intended to be a reflection of twice the daily change in percentage of the Dow Jones AIG Commodity Index Precious Metals subindex.

There are other ETFs that are set up to track other kinds of precious metals, such as platinum and palladium. There are also ETFs that track what are known as base metals, which include iron, nickel, lead, aluminum, tin and zinc.

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