Traders piled into leveraged inverse funds to bet the record prices in gold will drop. The ProShares UltraShort Gold Fund and the PowerShares DB Gold Double Short ETN are both designed to double the daily inverse of the metal. Shares outstanding increased 150 percent and 110 percent, respectively.
ETFs are "corroborating evidence of what happened in both sides of the gold trade in August," Michael Cuggino, who helps manage about $15 billion at Permanent Portfolio Funds in San Francisco, said in a telephone interview. "When volatility goes up, leveraged products are a way to get that better return for people who are active traders."
VIX Bets
Amid unprecedented price swings, investors boosted their bets on stock-market volatility. The Chicago Board Options Exchange Volatility Index climbed 25 percent last month, while daily volume for the VelocityShares Daily Inverse VIX Short Term ETN, which rises when futures on the measure fall and vice versa, had the third-biggest increase out of the 100 ETFs, jumping 276 percent.
Financial stocks had the second-biggest loss out of 10 groups in the S&P 500 during August. Volume for the Direxion Daily Financial Bull ETF 3X Shares fund, which gains three times as much as the industry during a rally, climbed 185 percent as shares outstanding surged 70 percent.
"It was a product of the panic that you get when the herd moves in such an aggressive fashion one direction or the other," Dailey said. "Any time you have that kind of behavior, it's always a question of 'What are the opportunities?'"