Fluctuating Gold Prices Open Opportunities in 2 ETFs

Gold prices are continuing their upward trajectory, rising 3% within the past month as investors continue to anticipate rate cuts heading into 2024. The fluctuations in gold prices, whether they head up or down, creates opportunities in a pair of leveraged exchange-traded funds from Direxion.

Given gold’s current rally, the U.S. Dollar Index (DXY) has also been trending lower, falling 1.5% in the past month. Analysts don’t foresee any short-term headwinds derailing gold’s push to even higher heights as macroeconomic factors are currently favoring the precious metal.

“The anticipated retreat in both the USD and interest rates across 2024 are key positive drivers for gold,” said Heng Koon How, head of markets strategy, global economics and markets research at United Overseas Bank.

An alternative to investing in gold is to also look at ancillary services that support the precious metals market such as mining. In certain instances, gold mining stocks can prove to be more beneficial in the short-term investment horizon as opposed to the long-term, thereby creating opportunities for traders.

“Commodity-based assets, like gold mining stocks, often face challenges in sustaining long-term upward trends due to the mean-reverting nature of commodities,” said Dean Christians, senior research analyst at SentimenTrader, as reported by Barron’s.. “This characteristic makes adopting a buy-and-hold strategy challenging. Nonetheless, during cyclical upswings, returns can be spectacular over a short period.”

Play Gold Price Moves With Miners

Traders who want to leverage gold miners to play off gold price fluctuations can do just that — use leverage. That extra juice can help traders maximize their profit potential if their bullish or bearish notions prove correct on the short-term direction of gold prices.

For bullish plays on gold, or more specifically, gold miners, consider 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 the mining for the precious metal.

If gold prices head in the opposite direction, traders can play off their bearish notions with the Direxion Daily Gold Miners Index Bear 2X Shares (DUST). This fund does  the opposite of NUGT, seeking daily investment results equal to 200% of the inverse of the daily performance of the aforementioned NYSE Arca Gold Miners Index.

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