As the S&P 500 was roaring to a new high in Monday’s trading session, the risk-on sentiment made gold take a back seat as prices dipped. However, it presents a buying opportunity for traders wanting to make a play on gold by buying the dip and for those who want more than traditional exposure, there are leveraged ETFs to consider.
From a technical perspective, chartists are still favoring gold despite the celebratory champagne bottles popping in the stock market.
“A bullish U.S. stock market that is near record highs is limiting buying interest in the safe-haven metals,” wrote Jim Wyckoff of Kitco News. “However, the downside in gold and silver markets will be limited as their technical chart postures remain overall bullish. December gold futures were last down $2.40 an ounce at 1,502.70. December Comex silver prices were last up $0.044 at $17.97 an ounce.”
Doubling Up on Gold Exposure
For traders who want double the exposure to gold prices, there’s the ProShares Ultra Gold (NYSEArca: UGL). UGL seeks a return that is 2x the return of a benchmark (target) for a single day, as measured from one NAV calculation to the next.
Due to the compounding of daily returns, returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks. Investors should monitor holdings as frequently as daily.
UGL is ideal for:
- Seeking magnified gains (will also magnify losses)
- Getting a target level of exposure for less cash
- Overweighting a market segment without additional cash
Tripling Gold Exposure
For investors needing even more than double exposure, there’s the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), which makes a play on gold miners. NUGT seek 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.
The index is a modified market capitalization weighted index comprised of publicly traded companies that operate globally in both developed and emerging markets, and are involved primarily in mining for gold and, to a lesser extent, in mining for silver. The Index will limit the weight of companies whose revenues are more significantly exposed to silver mining to less than 20% of the Index at each rebalance date.
NUGT is deal for:
- Magnifying your short-term perspective with daily 3X leverage
- Going where there’s opportunity, with bull and bear funds for both sides of the trade; and
- Staying agile – with liquidity to trade through rapidly changing markets
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