ProShares Ultra Gold (UGL), an ETF designed to deliver twice the daily performance of gold, experienced a sharp 5.04% decline in pre-market trading on Wednesday. This significant drop comes amidst growing skepticism about the sustainability of gold's recent bull run, which has seen the precious metal soar above $3,400 per ounce.

The plummet in UGL's value reflects a potential correction in the gold market, amplified by the fund's leveraged nature. Experts are questioning whether gold's meteoric rise can continue, with some pointing to historical patterns that suggest a potential downturn. Claude Erb, a former commodities trader, noted that there is no "objectively provable rationale for why gold is trading where it is today," highlighting the speculative nature of the current gold market.

Investors in UGL and other gold-related assets are now grappling with various theories about gold's future performance, including its efficacy as an inflation hedge, a safe haven during stock market declines, and a hedge against dollar devaluation. However, historical data provides limited support for these theories, suggesting that gold's behavior remains largely unpredictable. As uncertainty grows, leveraged ETFs like UGL may experience heightened volatility, as evidenced by today's sharp decline.