As Yields Rise, Gold Is Down but Not Out | ETF Trends

Treasury yields have been rising, which have pushed other safe haven assets like gold out of the way, but while the precious metal is down, it certainly isn’t out. Some analysts feel the technical data still effectuates bullishness.

“Gold markets have broken down rather significantly during the week, slicing well below the $1,500 level,” wrote Christopher Lewis in FX Empire. “This is a very negative sign, but when you look at the weekly chart, you can see that we are still technically and a bullish flag. Quite frankly, this market needs to save itself rather quickly or it’s going to be serious trouble. The $1,450 level underneath will continue to keep a bit of support into the market based upon the ascending triangle on the daily chart, but at this point, it looks very likely to cause a bit of a reaction.”

Lewis underscores the importance of that $1,450 price level in determining what gold could do in the forthcoming weeks. The capital markets have been sensitive to the U.S.-China trade deal news, which could swing in favor of gold.

“If the flag pans out, and we break above the top of it, the market could then go towards the $1,800 level,” Lewis wrote. “However, if the $1,450 level underneath gets broken, then the $1,400 level would be tested, and then eventually the $1,350 level after that. This is mainly due to the US/China situation being all over the place, and as things looked very positive in the middle the week, we had seen the ‘safety trade’ rollover as the gold market offers that safety. At this point in time, there will be a lot of volatility, but sooner or later we should see some type of impulsive candlestick that we can follow. This will literally swing back and forth due to the risk appetite involving all things China, which unfortunately moves with the latest Tweet or headline.”

Traders looking to buy the dip can look at the  Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), which makes a play on gold miners. 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.

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.

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