Gold bullion and miner exchange traded funds are rallying and are now testing their short-term resistance as traders trim Federal Reserve rate hike bets and global volatility adds to safe-haven demand.
On Thursday, the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) were up about 1.9%, trading back above their 50-day simple moving average.
COMEX gold futures were up 2.2% Thursday, hovering around $1,152.6 per ounce.
The Market Vectors Gold Miners ETF (NYSEArca: GDX), the largest and most heavily traded gold miners ETF, jumped 4.9% and Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) increased 4.8% on Thursday. Additionally, the Sprott Gold Miners ETF (NYSEArca: SGDM), the first factor-based gold miners ETF, advanced 5.0% and the Sprott Junior Gold Miners ETF (NYSEArca: SGDJ) gained 5.1%. The gold miner ETFs also moved back above their 50-day simple moving averages Thursday. [Gold Miner Stocks, ETFs Trading at Cheapest to Bullion in Three Decades]
Gold was trading at its highest in a month after the Fed raised concerns over the low inflation and wanted to see further labor market improvements, which fueled speculation that central bank could push off an interest rate hike, Bloomberg reports. [Oversold Gold Miner ETFs May Have Opportunity to Rebound]
Bullion was recovering lost ground after dropping to a five-year low last month on concerns that the Fed would hike rates as early as September. Looking ahead, traders calculate a 36% chance that policy makers could hike rates next month, down 48% on Tuesday.
“Expectations of a September rate rise are now fading and the focus is shifting to December, to the benefit of gold,” Tom Kendall, a precious metals strategist at ICBC Standard Bank Plc, told Bloomberg.
Additionally, gold is seeing greater support from safe-haven demand after currency devaluations across Asia added to investment demand for a better store of value than paper currencies or stocks and bonds.
“Global currency volatility is lending strength into gold. People want something stable that they can hold,” Bob Haberkorn, a senior commodities broker with RJO Futures, told the Wall Street Journal.
Meanwhile, leveraged long gold miner funds were among the best performing ETFs Thursday. The Direxion Daily Junior Gold Miners Index Bull 3x Shares (NYSEArca: JNUG) and the Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) take the 3x or 300% daily performance of a group of large gold miners and junior miners, respectively. JNUG jumped 12.8% and NUGT surged 14.6%. Furthermore, the recently launched ProShares Ultra Gold Miners (NYSEArca: GDXX) and ProShares Ultra Junior Miners (NYSEArca: GDJJ), which take the 2x or 200% daily performance of large miners and junior miners, increased 10.9% and 8.8%, respectively.
Additionally, bullion-related DB Gold Double Long ETN (NYSEArca: DGP) was up 3.6% and the ProShares Ultra Gold (NYSEArca: UGL) was 3.8% higher.
SPDR Gold Shares
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Full disclosure: Tom Lydon’s clients own shares of GLD.
Max Chen contributed to this article.