Editor’s note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don’t have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
Precious metals generally have a knack for thriving in market environments when uncertainty is elevated. Granted, there’s always some level of uncertainty that market participants have to grapple with, but between high geopolitical tensions and questions surrounding the future of monetary policy, could the mining sector finally start to shine again?
A Geopolitical Triumph Over Opportunity Cost?
One of the persistent headwinds the precious metal sector, and by extension, mining stocks face is the economic principle of opportunity cost. Outside of earning potential dividends through mining stocks, precious metal traders can’t earn any income through their ownership of gold and silver.
In other words, there’s an opportunity cost to owning precious metals in a macroeconomic environment that includes interest rates at multi-year highs – not earning interest. However, precious metals have seen some positive price action lately, and the catalyst is likely geopolitical.
Between ongoing events in Ukraine and tensions in the Middle East, precious metals seem to be finding a new footing. Traders that think the precious metal mining sector could act as a refuge during this volatile period may consider Direxion’s Daily Gold Miners Index Bill 2X Shares (Ticker: NUGT), which seeks daily investment results, before fees and expenses, of 200% of the performance of the NYSE Arca Gold Miners Index,* which is a commodity related equity index, consisting of a basket of gold miner related stocks. The index does not invest in physical commodities and should not be expected to directly track the price performance of gold.
A few of the fund’s top holdings include Newmont Corporation (Ticker: NEM), Franco Nevada (Ticker: FNV), and Barrick Gold (Ticker: GOLD). NEM just reported its recent early results, which showed an earnings-per-share (EPS)* of $0.36 compared to estimates of $0.42. GOLD’s recent earnings results showed an EPS of $0.24, which exceeded estimates of $0.21. FNV is slated to report its latest earnings results on November 8, and analysts are looking for an EPS of $0.82. A better-than-expected result could be a catalyst to catapult NUGT higher.
To view the funds’ full holdings, click here. Holdings are subject to risk and change.
Below is a daily chart of NUGT as of November 2, 2023.
Source: TradingView.com
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. For the most recent month-end performance go to Direxion.com/etfs. For standardized performance click here.
Waiting for the DUST to Settle
One of the bearish outlooks for the precious metal mining sector surrounds a de-escalation in geopolitical tensions. Another potential bearish scenario is for economic data to remain strong, which could cause traders and investors to opt for other assets like stocks and bonds in lieu of metals.
Traders would be mindful to keep an eye on upcoming economic data, especially the next inflation CPI* report, which is scheduled to be released on November 14. We’ve already had three hotter-than-expected inflation reports in a row, and if we get another one, it could send interest rates higher, which has been a headwind for the metals sector.
Traders that prefer the bearish outlook in metal miners may have an opportunity with Direxion’s Daily Gold Miners Index Bear 2X Shares (Ticker: DUST), which seeks seek daily investment results, before fees and expenses, of 200% of the inverse (or opposite) of the performance of the NYSE Arca Gold Miners Index.
Below is a daily chart of DUST as of November 2, 2023.
Source: TradingView.com
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. For the most recent month-end performance go to Direxion.com/etfs. For standardized performance click here.
Concentrated Mining Plays
Traders seeking more risk in the metal mining sector may be interested in Direxion’s Daily Junior Gold Miners Index Bull 2X Shares (Ticker: JNUG) and Daily Junior Gold Miners Index Bear 2X Shares (Ticker: JDST). JNUG and JDST seek daily investment results, before fees and expenses, of 200%, or 200% of the inverse (or opposite), respectively, of the performance of the MVIS Global Junior Gold Miners Index*.
*Definitions and Index Descriptions
The NYSE Arca Gold Miners Index (GDMNTR) 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. The Index may include small- and mid-capitalization companies and foreign issuers.
The MVIS Global Junior Gold Miners Index (MVGDXJTR) tracks the performance of foreign and domestic micro-, small- and mid-capitalization companies that generate, or demonstrate the potential to generate, at least 50% of their revenues from, or have at least 50% of their assets related to, gold mining and/or silver mining, hold real property or have mining projects that have the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver.
These funds track a commodity related equity index, consisting of a basket of gold miner or junior gold miner related stocks. They do not invest in physical commodities and should not be expected to directly track the price performance of gold.
One cannot directly invest in an index.
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at www.direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
Leveraged and Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying index over periods longer than one day. They are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk and who actively manage their investments.
Direxion Shares Risks – An investment in each Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with the Funds’ concentrating their investments in a particular industry, sector, or geographic region which can result in increased volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. Risks of each Fund include Effects of Compounding and Market Volatility Risk, Leverage Risk, Market Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Other Investment Companies (including ETFs) Risk, Cash Transaction Risk, Tax Risk, and risks specific to investment in securities of Gold and Silver Mining Companies and the Mining and Metal Industry, including Emerging Markets Risk, and Canadian Securities Risk. Because the Funds’ Index is concentrated in the gold mining industry and may have significant exposure to assets in the silver mining industry, the Funds will be sensitive to changes in the overall condition of gold- and silver-related companies. Competitive pressures may have a significant effect on the financial condition of gold- and silver-related companies. In addition, for the Direxion Daily Gold Miners Index Bull 2X Shares, Daily Index Correlation Risk, and for the Direxion Daily Gold Miners Index Bear 2X Shares, Daily Inverse Index Correlation Risk, and risks related to Shorting. Additional risks include, for the Direxion Daily Junior Gold Miners Index Bull 2X Shares, Daily Index Correlation Risk, and for the Direxion Daily Junior Gold Miners Index Bear 2X Shares, Daily Inverse Index Correlation Risk, and risks related to Shorting. Please see the summary and full prospectuses for a more complete description of these and other risks of each Fund.
Distributor: Foreside Fund Services, LLC.
