ProShares Ultra Gold (UGL), an ETF designed to deliver twice the daily performance of gold bullion, saw a sharp 5.04% decline in pre-market trading on Wednesday. This significant drop comes amid growing uncertainty in the gold market, despite the precious metal's recent surge above $3,400.

The plunge in UGL's value reflects the complex and often unpredictable nature of gold pricing. Recent analysis suggests that gold's meteoric rise might be nearing a peak. Claude Erb, a former commodities trader, points out that the ratio of gold's price to the consumer price index (CPI) is currently at a record high of over 10, compared to a 50-year average of around 4. Historically, such extreme levels have often preceded significant corrections in gold prices.

While various theories attempt to explain gold's movements - including its role as an inflation hedge, a safeguard against stock market declines, or a hedge against dollar devaluation - experts emphasize that none of these theories are objectively provable. This lack of certainty, combined with the leveraged nature of UGL, likely contributed to the ETF's sharp pre-market decline as investors reassess their positions in the face of potential market volatility.