By Jon Ogg, InvestorPlace.com

Gold exchange-traded funds and exchange-traded notes have become the new fad for 401k plans and individual investors. Folks have been flocking to the key gold ETFs via SPDR Gold Trust (GLD), Market Vectors Gold Miners ETF (GDX), iShares COMEX Gold Trust (IAU) and even the ETFS Physical Swiss Gold Shares (SGOL). In fact, GLD would be one of the top five or six central government banks in the world if measured solely in gold holdings.

Anytime you get a hot market, as we can see now with gold, you can bet more investment vehicles will pop up to capitalize on the trend. Enter leveraged gold exchange-traded funds and exchange traded notes, which add another layer to playing the gold market right now.

• Check out top-performing ETFs

Two of the most obvious and liquid note-funds from the same family that take on leverage in the directional gold trades are the PowerShares DB Gold Double Long ETN (DGP) and PowerShares DB Gold Double Short ETN (DZZ).

Keep in mind that these are technically exchange-traded notes rather than true asset trusts, which actually hold the shiny yellow metal. That means that there is issuer risk, and all leveraged products have a larger tracking risk when it comes down to market correlation.

Related Article: Buy 3x Emerging Markets ETF

Invesco called these "the first exchange-traded products that provide investors with a cost-effective and convenient way to take a short or leveraged view on the performance of gold." 

These are also based on an implied total return of the Deutsche Bank Liquid Commodity Index-Optimum Yield Gold.  That index is designed to reflect the performance of certain gold futures contracts plus the returns from investing in 3 month United States Treasury bills. 

Again, there is no physical value backed by real gold. And again, an implied added risk of tracking error exists compared with the ETFs via SPDR Gold Trust (GLD).

PowerShares DB Gold Double Long ETN (DGP) is a fairly active vehicle for gold trading. The exchange-traded note, of course, has tracked gold's rise -- but the difference is that it is twice as volatile as gold since it is “double” long on the metal.  On October 7, 2010, when gold had a trading range closer to 3%, the double-long ETN had a trading band of $39.36 as a high and $37.58 as a low. Average volume here is also about 770,000 shares per day, and there have been 13 days in the last 3-months where volume has been above 1 million shares.

• Find a new broker and trade online

PowerShares DB Gold Double Short ETN (DZZ) is the same concept, but is “double short” on gold.  Rising gold prices kill this one, and its shares have gone from  $25 at launch down to under $9 as gold has risen.  Average volume here is also about 655,000 shares per day, and there have been 9 days in the last 3-months where volume has been above 1 million shares. If the price falls much further in this ETF, it may even have to consider a reverse stock split.

Related Article: Solar ETF Funds are Shining Bright

What is surprising about these ETN products is that with gold above $1,300 and with all of the speculation out there, the volume is not routinely in the millions of shares per day.  Perhaps investors and speculators learned their lesson about leveraged ETFs back when the banks were the top speculation asset class.

There is also the PowerShares DB Gold Short Exchange Traded Note (DGZ), which aims to just be a bet against gold on the short side.  As gold rises, this one falls and it is no shock that the DGZ ETN is at a 52-week low while gold hits new highs.  As such, trading volume is very light here with an average volume of only about 30,000 shares a day.  These have been more active with more than 150,000 shares for two of the most recent trading sessions, but as gold whips around at highs that is only to be expected.

Related Article: Silver ETF (SLV) Hits a New High

There are many ways to skin a cat or to bet on gold.  Many investors are simply buying out-of-the-money calls or out-of-the-money puts to get leveraged exposure to big upside or big downside moves ahead in gold.  There are now gold-dispensing ATMs and it seems like you can't watch TV without getting an advertisement about buying gold or silver coins or small bars.

Maybe one day soon you can just go to the casino and ask "What are the odds that gold is up by tomorrow night?"

Related Articles:

• Exchange-traded funds
• ETF research
  
• ETF information