There is at least one positive fundamental catalyst that potentially bodes well for gold miners ETFs going forward: Peak production of gold has likely come and gone, perhaps indicating that supply will dwindle, thereby boosting bullion prices.
“While Gold closed well above $1300 at $1330/oz, it faces resistance at the 2016 highs around $1375/oz. The net speculative position has reached 248K contracts or 46% of open interest. As the chart below shows, the 2016, 2012 and 2011 peaks in Gold all coincided with a net speculative position of 55% of open interest. If current trends continue, the net speculative position could reach 55% as Gold tests $1375/oz,” according to ETF Daily News.
Popular leveraged gold miners ETFs include the Direxion Daily Junior Gold Miners Index Bull 3x Shares (NYSEArca: JNUG), the triple-leveraged answer to the popular GDXJ. The Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) is JNUG’s large-cap counterpart.
“The breakout in Gold through $1300/oz has sparked the miners and juniors and we expect additional gains in the short-term as Gold has room to run. That being said, do note that the net speculative position in Gold is fairly high. It could reach an extreme level if Gold tests major resistance around $1375/oz,” notes ETF Daily News.
For more information on the gold market, visit our gold category.