International Gold 3×7: A High-Leveraged Exchange-Traded Note
International Gold 3×7 (GPLL) is an exchange-traded note (ETN) that provides investors with leveraged exposure to the price of gold. The ETN is structured such that its value tracks three times the daily performance of the spot price of gold.
GPLL is issued by Bank of America Merrill Lynch and is listed on the NYSE Arca exchange. The ETN has an annual expense ratio of 0.95%.
How GPLL Works
GPLL uses a complex financial instrument known as a swap to gain exposure to the price of gold. The swap agreement is with Barclays Bank and allows GPLL to track the performance of gold without physically holding the metal.
When the price of gold rises, GPLL’s value also rises. Conversely, when the price of gold falls, GPLL’s value falls. The leverage provided by the ETN means that GPLL will experience magnified gains or losses relative to the underlying gold price.
Risks of GPLL
GPLL is a high-leveraged investment and carries with it a number of risks. These risks include:
* Volatility: The price of gold is volatile, and GPLL’s value will be magnified by three times this volatility.
* Counterparty risk: The swap agreement with Barclays Bank creates counterparty risk. If Barclays Bank were to default, GPLL could lose its value.
* Interest rate risk: GPLL is a debt security and is therefore subject to interest rate risk. If interest rates rise, the value of GPLL could decline.
* Concentration risk: GPLL is solely focused on the price of gold. This concentration risk means that investors who hold GPLL have all of their eggs in one basket.
Who Should Invest in GPLL?
GPLL is a suitable investment for investors who are looking for:
* Leveraged exposure to the price of gold
* A short-term investment with the potential for significant gains
* A way to diversify their portfolio with a non-correlated asset
Investors should be aware of the risks associated with GPLL and should only invest an amount that they are comfortable losing.
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