Geopolitical concerns on the Russian-Ukrainian border add to a wall of worry for investors that includes inflation and rising interest rates. As such, more investors are heading towards the safe confines of precious metals like gold.
“I think we’re coming into a pretty major supercycle in precious metals,” said Chris Vermeulen, chief market strategist of TheTechnicalTraders.com, who believes gold could hit $2,400 within a year and $7,400 in five years. “I think we started back in 2019, and this is about a five-year cycle for gold, and it has been a very tough year for equities, we’ve had a very long bull market. I think things are getting a little long in the teeth in terms of the equities side,” he said. “When the stock markets get to the late stages, this is where we see commodities come to life.”
Vermeulen also believes that gold miners can also outdo the broad equity index given the forthcoming challenges.
“We need to see how this market sells off,” Vermeulen said, referring to a scenario in which equities decline. “If it goes into [a sell-off]like we saw in 2020 where it is a panic phase, and it goes straight down, it is going to pull gold, it is going to pull miners down, most likely. They’ll probably hold up the best and do okay compared to the other indexes, but they’ll probably get sold off. Now, if the market chops sideways and kind of a slow grind lower, that’s the perfect scenario for precious metals.”
Gold Price in US Dollars data by YCharts
A Mining Play With Triple Leverage
Traders looking to play off the strength can opt for a gold miner fund with triple leverage. One ETF to look at is the Direxion Daily Gold Miners Bull 3X ETF (NUGT).
NUGT, 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 the mining for gold and, to a lesser extent, silver.
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