Cooling Sentiment in the Gold Market Could Push This ETF Higher

With companies increasing their payrolls more than expected during the month of January, investors turned the risk-on dial higher, pushing safe haven assets to the side. This, in turn, pushed gold prices down to help bearish traders profit from the pullback.

According to a New York Times article, employers added 517,000 workers while the jobless rate dipped to its lowest level since 1969. Revisions to 2021 and 2022 data showed that job growth was stronger, indicating that labor demand is stronger than ever.

As such, prices for the yellow metal retreated as investors sought more risk-on opportunities that precious metals couldn’t offer. Despite this, the jobs data could provide fuel for the Fed to continue raising interest rates — that could feed into a potential recession and thus, allow gold to return to its upward trajectory.

This creates a push-pull dichotomy for gold that will be interesting to see as the Fed decides the next course of action for interest rates. The dollar could build off last year’s gains, pushing gold down, or the recent gold rally could sustain itself.

Get Bearish or Bullish

Either way, investors can get bearish or bullish on gold with Direxion Investments’ leveraged exchange traded funds (ETFs). If bearish momentum continues, investors should check out the Direxion Daily Gold Miners Index Bear 2X Shares (DUST).

DUST seeks daily investment results — before fees and expenses — of 200% of the inverse of the daily performance of the NYSE Arca Gold Miners Index. 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.

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, silver.

“All our clients are telling us a different reason why they want to buy gold. Some are worried about geopolitical uncertainty; others are worried about inflation impacting the dollar’s purchasing power,” said Phillip Streible, chief market strategist at Blue Line Futures. “This is a sign of underlying strength in the precious metal.”

Traders looking to play off the strength can opt to take the other side of the trade. They can accomplish this using the Direxion Daily Gold Miners Bull 2X ETF (NUGT).

For more news, information, and analysis, visit the Leveraged & Inverse Channel.