Traders Bet On Gold Miner Rally

July 27, 2017 2:40 pm
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Traders Bet On Gold Miner Rally

With the dollar mired in a lengthy slump, gold prices are showing signs of life in July and that could be one of the catalysts luring traders to popular leveraged exchange traded funds tracking gold miners equities.


The Direxion Daily Gold Miners Index Bull 3X Shares (NYSE:NUGT) and the Direxion Daily Gold Miners Index Bull 3X Shares (NYSE:JNUG) are two of the most heavily traded exchange traded funds. They are also two of the most volatile, serving as reminders that leveraged ETFs are best used by active, risk-tolerant traders that have the ability to monitor their positions throughout the trading day.


Due to the frequency with which NUGT and JNUG deliver intraday gains (and losses) that can be measured in double digits, the leveraged gold miners ETFs also remind investors that leveraged ETFs are best deployed as intraday trades, not as long-term investments.


Not Scared


Traders are not shying away from NUGT and JNUG. Certainly not in recent weeks. In the case of NUGT, which looks to deliver triple the daily returns of the NYSE Arca Gold Miners Index, traders have been readily embracing that ETF in recent weeks. Top holdings in the index include Barrick Gold Corp (NYSE:ABX) (10.23 percent) Newmont Mining Corp (NYSE:NEM) (9.49 percent), Franco Nevada Corp (NYSE:FNV) (7.06 percent), and Newcrest Mining Limited (ADR) (OTC:NCMGY) (6.49 percent). 


For the 30-day period ended July 24, NUGT averaged daily inflows of $1.57 million, according to issuer data. That is good for one of the best runs of asset accumulation over the past month by any of Direxion's leveraged bullish ETFs. Direxion is one of the largest issuers of inverse and geared ETFs. 


While gold prices are up about 8 percent year-to-date, further gains could be supported by the disappointing dollar and a dovish Federal Reserve. Dollar-denominated gold is usually seen as vulnerable to rising interest rates because the dollar often strengthens in that scenario and gold does not pay interest or dividends.




Data confirms that NUGT's small-cap counterpart, the aforementioned JNUG, has recently been popular as well. JNUG seeks to deliver triple the daily returns of the MVIS Global Junior Gold Miners Index. Top holdings in the index include Pan American Silver Corp. (USA)(NASDAQ:PAAS) (4.26 percent), Gold Fields Limited (ADR)(NYSE:GFI) (3.86 percent), and Tahoe Resources Inc (NYSE:TAHO) (3.69 percent)


For the 30-day period ended July 24th, daily inflows to JNUG averaged almost $2 million, according to issuer data


Some of those bets could be in hopes of a rebound as JNUG has tumbled more than 16 percent over the past month.


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