Federal Reserve Chairwoman Janet Yellen will give her much-anticipated Jackson Hole speech on Friday 10 a.m. Eastern, and depending on how dovish she seems, exchange traded funds on some of this year’s most popular plays may either continue to push higher or find an abrupt ceiling.
Yellen has maintained a dovish stance throughout the year, and most observers anticipate the Fed chief will likely raise rates at least one time this year, maybe in December. Looking at the fed fund futures market, options traders place a roughly 50-to-50 percent change of a 25 basis point hike at the December meeting.
If we continue to stay the course, the markets may enjoy a nice rebound in assets like gold and Treasuries, which have lost their way ahead of Yellen’s speech.
For instance, the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) have declined about 1.6% over the past week, with Comex gold futures now trading at $1,325.5 per ounce.
The VanEck Vectors Gold Miners ETF (NYSEArca: GDX) dropped 11.2% and VanEck Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) declined 12.9% over the past week as gold prices pulled back.
SEE MORE: Treasury Bond ETFs Strengthen Despite Hawkish Fed Comments
Meanwhile, long-term Treasury bond ETFs have been stuck without direction after falling off from their highs in early July. Over the past week, the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) was up 0.3%, PIMCO 25+ Year Zero Coupon US Treasury (NYSEArca: ZROZ) was flat and Vanguard Extended Duration Treasury ETF (NYSEArca: EDV) was 0.4% higher.
Alternatively, more aggressive traders may capitalize on a potential rally in these assets through leveraged ETF products, such as the DB Gold Double Long ETN (NYSEArca: DGP), which takes the double or 200% exposure of gold price movements, ProShares Ultra Gold ETF (NYSEArca: UGL), which also takes the 2x of gold prices, and VelocityShares 3x Long Gold ETN (NYSEArca: UGLD), which offers a larger 3x or 300% exposure to price movements.
For long Treasuries exposure, the ProShares Ultra 20+ Year Treasury (NYSEArca: UBT) takes the 2x or 200% daily performance of long-term Treasuries and Direxion Daily 20+ Year Treasury Bull 3x Shares ETF (NYSEArca: TMF) follows the 3x or 300% performance of long-term Treasuries.
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