Jump On 'JNUG' as Gold Prices Start to Inch Higher

Gold might be back in vogue, giving traders an opportunity for a backdoor play on miners with the Direxion Daily Jr Gold Miners Bull 2X ETF (JNUG).

As gold inches higher, JNUG has been following in lockstep, times two. With its extra leverage, JNUG gives 200% exposure to the daily performance of the MVIS Global Junior Gold Miners Index. The index includes companies from markets that are freely investable to foreign investors, including “emerging markets,” as that term is defined by the index provider. The fund is up 18% within the past month.

Inflation fears have been sparking volatility in equities as of late. In addition, cryptocurrencies have moved lower, which could be helping to spur a safe haven move back to gold.

“Gold prices are very strong at these levels. There are any number of things to scare investors into wanting to buy gold, but we also have a situation where in Europe, U.S. and Canada, where the vaccines are starting to have a positive effect,” said Jeffrey Christian, managing partner of CPM Group.

JNUG Chart

A Flight Back to Safety?

At the height of the pandemic in 2020, gold prices surged in a safe haven scramble for investors shielding themselves from the sharp market downturn. Gold faltered as the economy started to regain its footing amid a global vaccine deployment.

The cryptocurrency craze also may have taken some investors out of gold and into crypto.

“It’s been a rude awakening for bitcoin investors who thought they could handle the crypto volatility,” a CNBC report said. “The world’s largest digital currency suffered a 30% one-day drop last Wednesday, falling to about $30,000 apiece. Just in mid-April, bitcoin hit a record high of $64,829. The turbulence was dramatic even by crypto’s standards. The last time bitcoin saw a decline of this magnitude was March 2020 at the height of the Covid pandemic. And even then, the trading wasn’t as jarring.”

“Bitcoin has experienced 14 down days in May alone, according to Coin Metrics,” the article added. “So far this year, there have been 39 days with daily swings of 5% or more in either direction, based on bitcoin’s closing prices. There were 42 such days in all of 2020.”

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