Gold ended 2018 on a torrid pace, lifting shares of miners and the related exchange traded funds (ETFs) in the process.
The MVIS Global Junior Gold Miners Index (MVGDXJTR), a widely followed benchmark of junior miners, gained 11.18 percent in December.
What Happened
Strength in the junior miners boosted the fortunes of the Direxion Daily Junior Gold Miners Index Bull 3X Shares JNUG, one of the most popular and heavily traded leveraged ETFs. JNUG attempts to deliver triple the daily performance of the MVIS Global Junior Gold Miners Index.
That index “tracks the performance of foreign and domestic micro-, small- and mid-capitalization companies that generate, or demonstrate the potential to generate, at least 50% of their revenues from, or have at least 50% of their assets related to, gold mining and/or silver mining, hold real property or have mining projects that have the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver,” according to Direxion.
Why It's Important
After gaining 7.72 percent on the final trading day of 2018, JNUG finished December with a gain of about 40 percent, making it Direxion's best-performing bullish leveraged ETF on a monthly basis.
Broadly speaking, leveraged ETFs are volatile instruments not intended to be held for more than a few days. Those are points to be remembered with JNUG, which often resides among the more volatile leveraged ETFs.
Data suggest traders are treating JNUG as it should be treated, meaning profits are being taken in the leveraged miners fund as it rises. For the 10 days ended Dec. 28, 2018, JNUG saw $56.34 million in outflows, a total surpassed by just two other Direxion funds during that period, according to issuer data.
What's Next
Gold miners gained momentum late in 2018 even as the Federal Reserve raised interest rates for fourth time in December. That could bode well for miners heading into 2019, particularly if the Fed slows its pace of rate hikes or does not raise rates at all.
JNUG's bearish counterpart, the Direxion Daily Junior Gold Miners Index Bear 3X Shares JDST, took in $8.16 million for the 10 days ended Dec. 28, 2018.
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