Can Gold Miner ETFs Be a Better Alternative to Leveraged Gold ETFs?

The Gold ETFs Under Examination

For our leveraged gold ETF, we'll use the ProShares Ultra Gold

. The fund seeks to deliver two-times (2x) the daily return of the Bloomberg Gold Subindex. Like most leveraged ETFs, UGL doesn't simply borrow money to buy more gold.

Instead, its portfolio consists primarily of cash collateral held in the ProShares GENIUS Money Market ETF

, which supports a series of total return swaps with counterparties including Citibank, UBS, and Goldman Sachs referencing the Bloomberg Gold Subindex. The fund also holds positions in 100-ounce COMEX gold futures to help implement its strategy.

As with all daily leveraged ETFs, it's important to remember that the 2x objective applies only to a single trading day. Over longer holding periods, returns can diverge substantially from exactly twice the underlying index because of daily compounding, particularly during volatile or sideways markets.

UGL is also relatively expensive, charging a 0.95% expense ratio. One additional consideration is taxes. Because UGL gains part of its exposure through commodity futures, it is structured as a commodity pool and issues investors a Schedule K-1 instead of the more familiar Form 1099.

In comparison, the VanEck Gold Miners ETF

is a much more straightforward product. The ETF manages roughly $23 billion in assets under management and charges a considerably lower 0.51% expense ratio. It passively tracks the MarketVector Global Gold Miners Index, a portfolio of 66 companies with a weighted average market capitalization of approximately $38 billion.

Its holdings include many of the world's largest gold producers, such as Newmont, Agnico Eagle Mines, and Barrick Mining, alongside precious metals royalty and streaming companies including Wheaton Precious Metals and Franco-Nevada.

Unlike bullion-based products, GDX also generates a modest amount of income from the dividends paid by its underlying holdings. As of the latest data, the ETF offers a 0.62% 30-day SEC yield.

UGL vs. GDX vs. GLD: Which Delivered Better Results?

According to Testfolio's backtesting tool, I examined the period from December 30, 2022, through August 3, 2026, covering just over three and a half years of the current gold bull market.

Both UGL and GDX outperformed GLD, but that isn't particularly surprising. UGL is designed to provide 2x daily exposure to gold, while gold miners typically benefit from operating leverage as higher gold prices flow through to profits.

What is interesting is that UGL did not deliver exactly twice GLD's return over the full period. Leveraged ETFs reset their exposure daily, meaning long-term returns are determined by the geometric rather than the arithmetic mean. Gains and losses compound on each other, so over extended periods, particularly during volatile markets, performance naturally drifts away from a simple two-times multiple for better or worse. Even so, UGL still produced the strongest upside of the three funds.

Risk tells a different story. UGL's annualized volatility was almost exactly double that of GLD. In other words, while returns didn't compound into a perfect 2x multiple, the volatility was much closer to the stated leverage target. That helps explain why UGL actually produced a lower risk-adjusted return than GLD, finishing with a Sharpe ratio of 0.91 versus 0.98 for GLD.

UGL's worst decline was nearly twice that of GLD, illustrating that leverage tends to amplify downside more consistently than it amplifies long-term returns. While leveraged ETFs can be effective tactical trading vehicles, investors should recognize that the additional risk compounds just as readily as gains.

GDX also struggled on a risk-adjusted basis. Although its annualized volatility was modestly lower than UGL's, its average drawdowns were remarkably similar, even if its maximum drawdown was somewhat smaller. The result was the weakest Sharpe ratio of the group at 0.82.

The diversification characteristics also differed meaningfully. One of gold's primary attractions is its relatively low correlation with equities. That was reflected in GLD's beta of roughly 0.20 versus the S&P 500. UGL's beta of 0.39 was higher because of its leverage, but still low.

GDX was different. Despite being tied to gold prices, it remains a portfolio of publicly traded mining companies. Over the test period, it exhibited a much higher beta of 0.76 versus the S&P 500, making it considerably more sensitive to movements in the broader equity market.

The correlation data reinforces that conclusion. As expected, GLD and UGL remained highly correlated because both ultimately derive their returns from the price of gold. GDX, however, displayed lower correlations with both funds.

While gold prices remain an important earnings driver for miners, the ETF is still exposed to the same market forces that affect other equities, including changes in investor sentiment, operating performance, and company-specific risks. The result is that GDX behaves less like leveraged gold and more like a specialized equity sector with significant exposure to the price of gold.

Different Tools for Different Investors

I still think GDX can be an acceptable substitute for UGL for certain investors. While it doesn't provide the same direct exposure to gold prices, it avoids UGL's high 0.95% expense ratio, the added tax complexity of a Schedule K-1, and the path dependency that comes with daily leveraged ETFs.

They're simply different tools for different jobs. If your objective is a long-term buy-and-hold allocation with the potential for amplified exposure to a rising gold price, GDX may be the more practical choice despite its higher equity market risk. If, however, you're a short-term trader looking for a vehicle that tracks movements in gold itself as closely as possible on a leveraged basis, UGL might be better.

Please note that this article reflects the author’s personal views and does not represent the opinions of the publication or its affiliates. It is for informational purposes only and does not constitute investment advice. It is essential to seek guidance from a registered financial professional before making any investment decisions.