  This paper studies the empirical tracking performance of leveraged ETFs on
gold, and their price relationships with gold spot and futures. For tracking
the gold spot, we find that our optimized portfolios with short-term gold
futures are highly effective in replicating prices. The market-traded gold ETF
(GLD) also exhibits a similar tracking performance. However, we show that
leveraged gold ETFs tend to underperform their corresponding leveraged
benchmark. Moreover, the underperformance worsens over a longer holding period.
In contrast, we illustrate that a dynamic portfolio of gold futures tracks
significantly better than various static portfolios. The dynamic portfolio also
consistently outperforms the respective market-traded LETFs for different
leverage ratios over multiple years.
