Accommodative central banks, among other factors, have been a boon for gold and miners equities this year. Some commodities market observers believe that trend will continue in 2020, potentially spelling opportunity for nimble traders with geared ETFs such as the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT) and Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG).
NUGT seeks daily investment results, before fees and expenses, of either 300% or 300% of the inverse (or opposite), of the performance of the NYSE Arca Gold Miners Index. JNUG seeks daily investment results, before fees and expenses, of 300% of the performance of the MVIS Global Junior Gold Miners Index.
The precious metals mining industry has also been on the road to improved efficiency as they cut costs, increase production and raise more money. Supporting the bullish thesis is that many gold miners are finding ways to boost output while keeping a lid on costs. Of course, lower interest rates are helping, too.
“Gold has fallen from its recent highs as the market reacts positively to favorable Brexit news and progress on a trade deal between the U.S. and China,” said Direxion in a recent note. “If traders believe that more monetary policy easing is coming, gold bullion and gold mining equities should remain on traders’ radars. More rate cuts, forward guidance, inflation targeting, and increased asset purchases could all be on the table in 2020 as the Fed looks to support this recovery and remains focused on financial markets.”
More Upside In 2020?
Some commodities market observers believe the yellow metal can continue delivering solid showings in 2020.
Bullish gold traders didn’t get the news they wanted when the most recent Federal Reserve minutes revealed that more rate cuts may not be on the horizon, which could feed into lower gold prices. However, market experts feel that in the long run, gold prices will see increases.
“In the near term, look to inflation expectations to gauge whether the investment community believes that pricing pressures may be sustained as they remain consistently lower than prior to the Global Financial Crisis and even the years after,” according to Direxion.
More recently, the Federal Reserve has noted that low inflation is one of the reasons that they put their rate hiking cycle on hold, but a case can be made that the potential for pricing increases may be found by keeping rates lower for longer, especially if the economy starts to grow materially.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.