Gold has been fraught for most of 2022 with weakness thanks to a stronger dollar amid rising interest rates, but the precious metal could be on the verge of a breakout, making leveraged exchange traded funds (ETFs) an ideal option to play a bounce.
At some point, the U.S. Federal Reserve will have to back off raising interest rates at the expense of economic growth. Even if a recession were to hit the U.S. economy, a scramble to safe haven assets could propel gold prices back up again.
There are already early signs that strength in the dollar could finally be subsiding. Yields in safe haven Treasury debt are also heading downward along with the greenback.
“Some weakness in the dollar, yields are ticking down slightly and that’s what’s helping gold and the whole precious metal complex,” said Bob Haberkorn, senior market strategist at RJO Futures.
Economic data could also give the Fed more reason to pump the brakes on rate hikes. The most recent employment data revealed that while hiring increased during the month of October, the unemployment rate did go up to 3.7%. This could be the necessary speed bump for a tightening monetary policy strategy that could help propel the precious metal higher.
Play the Gold Bounce With Miners
As opposed to investing in gold prices directly via bars, futures, or spot prices, another route is via miners. For traders, that means giving the Direxion Daily Gold Miners Bull 3X ETF (NUGT) a closer look.
NUGT seek daily investment results, before fees and expenses, of double the performance of the NYSE Arca Gold Miners Index. 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.
Another option from Direxion Investments is the Direxion Daily Jr Gold Miners Bull 2X ETF (JNUG). JNUG gives 200% exposure to the daily performance of the MVIS Global Junior Gold Miners Index, which includes companies from markets that are freely investable to foreign investors, including “emerging markets,” as that term is defined by the index provider.
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