Pressure continues to come down on gold as the U.S. dollar continues to rise, which is helping leveraged funds like the bearish Direxion Daily Jr Gld Mnrs Bear 2X ETF (JDST) gain 27% for the year.
“The dollar hit a fresh four-month high to the euro on Thursday amid worries about Europe’s third COVID-19 wave and potential U.S. tax hikes,” a CNBC article noted. “U.S. Treasury yields dipped after the Treasury saw average demand for an auction of five-year notes, with the market appearing to stabilize after benchmark yields reached one-year highs last week.”
“Lower returns on Treasury bonds reduce the opportunity cost of holding non-yielding bullion,” the article added.
JDST seeks daily investment results equal to 200% of the inverse of the daily performance of the MVIS Global Junior Gold Miners Index, which tracks the performance of foreign and domestic micro-, small- and mid-capitalization companies. The fund invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse or short leveraged exposure to the index equal to at least 80% of the fund’s net assets.
In its year-to-date chart, JDST’s 200-day moving average (MA) is still above its 50-day moving average. Should the 50-day MA cross up the 200-day MA, more upside could take place for JDST.
Using the relative strength index (RSI), the reading sits at 57.64, which is below overbought levels.
All Eyes on Rates
Last week, the Federal Reserve held steadfast to their commitment to keep interest rates low until at least 2023. Traders will continue to keep an eye on the Fed and how they react to rising yields, which could be followed by inflation.
Treasury yields have been ticking higher the past few weeks, sparking fears of inflation.
“The timeline for when the Fed will start to raise rates will depend on what is happening with the economy, New York Federal Reserve Bank President John Williams said on Wednesday,” the CNBC article said further. “Chicago Fed President Charles Evans also said the central bank will not reduce monetary policy accommodation until it sees actual improvements.”
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