A volatile exchange traded fund that profits from weakness in gold miner shares vaulted nearly 7% on Wednesday as the stocks mirrored steep losses in precious metals.
Gold prices fell by about $100 an ounce in Wednesday’s sell-off, while stock ETFs were higher after strong durable goods orders. [Stock ETFs Waver Before Jackson Hole]
Gold miner stocks have rallied this summer but a sector ETF, Market Vectors Gold Miners ETF (NYSEArca: GDX), has encountered resistance this week in a third attempt at a breakout over the past year. The ETF lost more than 3% on Wednesday. [Gold Miners ETF Turned Back at 52-Week High]
Direxion Daily Gold Miners Bear 2x Shares (NYSEArca: DUST) seeks daily investment results of 200% of the inverse, or opposite, of the price performance of the NYSE Arca Gold Miners Index. It’s designed as a trading vehicle and not for buy-and-hold investing. The fund rallied Wednesday. [ETF Chart of the Day: Inverse Gold Funds]
The Commerce Department announced that bookings for goods meant to last three years increased 4% in July, a four month high, reports Matt Walcoff for Bloomberg. The report helped boost sentiment Wednesday as traders marked time before Federal Reserve Chairman Ben Bernanke’s speech on Friday.
“There seems to be a little bit of a pause on the panic of investors,” Tony Demarin, chief investment officer at BCV Asset Management. “Durable goods are another reason why the risk trade can be considered to be back on a bit.”
Gold ETFs were off about 4% Wednesday following a similar loss the previous day. [Gold ETFs See Outflows]
“Gold prices may be disappointed if and when QE3 is not announced. The rally has become parabolic in the last three weeks and a bearish divergence has developed,” commented Tom Pawlicki, MF Global metals analyst, reports Murray Coleman for Barron’s.
Jordan Roy-Byrne, precious metals analyst and trader, advises investors to “look for strength from the gold and silver stocks” while gold consolidates. “The large caps are quite close to a major breakout while the junior golds are not far behind,” Roy-Byrne added.
For more information on gold stocks, visit our gold miners category.
Direxion Daily Gold Miners Bear 2x Shares
