Gold Traders Look to Inverse ETFs to Capture Fallout

As gold prices pullback with market uncertainty abating, bullion prices and related miner sector have been losing their luster. Nevertheless, traders have capitalized on the weakness through inverse exchange traded funds.

Comex gold futures have weakened from their $1,351 per ounce highs in early September and now trad around $1,298 per ounce.

The VanEck Vectors Gold Miners ETF (NYSEArca: GDX), the largest exchange traded fund dedicated to gold mining stocks, and the ETF’s small-cap counterpart, the VanEck Vectors Gold Miners ETF (NYSEArca: GDXJ), have both declined since their early September highs, with GDX and GDXJ both testing its short-term 50-day support.

However, aggressive traders willing to bet on more declines for gold miners have increased their bets on the Direxion Daily Gold Miners Index Bear 3X Shares (NYSEArca: DUST) and the Direxion Daily Junior Gold Miners Index Bear 3X Shares (NYSEArca: JDST). Over the past month, DUST has attracted $109.5 million in net inflows and added $9.5 million, according to XTF data.

The Direxion Daily Gold Miners Index Bear 3x Shares tries to reflect the -3x or -300% daily returns of the benchmark NYSE Arca Gold Miners Index, the same underlying benchmark of GDX. The fund includes exposure to a range of small-, mid- and large-cap global gold mining companies.