As Gold Prices Decline, Don't Be Left in the 'DUST' | ETF Trends

As more investors turn up the dial on risk, it’s putting more downward pressure on gold prices. This is welcome news for bearish traders using the Direxion Daily Gold Miners Index Bear 2X Shares (DUST).

“Gold and silver mutual funds and ETFs witnessed the biggest outflows in three months in the week ended Feb. 10 as investors put their money into soaring equities and high-yielding bond markets,” a Reuters article pointed out.

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.

DUST has been rising 6% the last five days thanks to outflows from precious metal funds. As the flight from safe haven metals continues amid a global vaccine rollout, look for more bearishness ahead.

“‘Gold-as-a-safe-haven’ isn’t incredibly appealing for investors during an incredible economic recovery,” said TD Commodities in a report.

DUST Chart

Out with the Gold, In with the Equities

It seems, based on inflows and outflows data, that investors are apt to seek more risky assets these days. While this sounds good for equities funds, it’s just the opposite for precious metal funds.

“Investors net sold $1.4 billion in precious metal funds in the week ended Feb. 10, according to weekly data available for 338 precious metal funds on Refinitiv Lipper,” Reuters added. “On the other hand, investors put $43.1 billion in equities funds, as global stocks surged on optimism over vaccine roll-outs and hopes of a bigger fiscal package from the United States.”

In the meantime, funds like DUST have been gaining off the bearish momentum. The fund is up 11% within the last three months.

DUST Chart

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