Recession fears have been leading to increased volatility, especially in the major stock market indexes as of late. However, as economic data starts to quell those fears, it can also help gold prices.
Increased recession fears have sparked a move to safe haven assets like gold. But prices can also head in an upward direction as those fears dissipate. Capital markets are eagerly anticipating the first interest rate cut. That should push down the dollar while propping up gold.
Any short-term weakness will allow prospective gold investors to purchase the dips in prices. Analysts are eyeing the mid- to long-term trend and it portends bullishness.
“In the medium term, the outlook for gold remains positive, with any dips likely to be short-lived due to underlying macroeconomic factors,” said Zain Vawda, market analyst at MarketPulse by OANDA.
Additionally, if market news continues to be favorable to forthcoming rate cuts, gold’s prices should continue seeing upward momentum. The precious metal is already up around 19% for the year and could continue climbing.
“Yesterday’s U.S. jobless claims data eased recession concerns, boosting gold prices,” Vawda added. “Additionally, comments from the Fed this week have supported the notion that rate cuts may be forthcoming.”
2 Leveraged Mining Options
Traders looking to capitalize on opportunities for bullish gold prices can do so without trading spot prices. Another way is an indirect play via miners. Direxion has a pair of products to consider if traders are forecasting higher gold prices.
Furthermore, traders can also amplify their exposure up to 200% to leveraged mining ETFs. One fund to consider is the Direxion Daily Gold Miners Bull 2X ETF (NUGT). The fund seeks daily investment results that equate to double the performance of the NYSE Arca Gold Miners Index. The index is a modified market-cap-weighted index comprising publicly traded companies that operate globally in developed and emerging markets and are involved primarily in mining for the precious metal.
Small-cap companies can make profound moves to the upside during a bullish run. That said, another option is the Direxion Daily Jr Gold Miners Bull 2X ETF (JNUG). The fund gives 200% exposure to the daily performance of the MVIS Global Junior Gold Miners Index. That index tracks the performance of foreign and domestic micro-, small- and midcap companies that generate revenue from mining or similar activities.
For more news, information, and strategy, visit the Leveraged & Inverse Channel.
