Gold has become extremely popular with investors lately, as prices climbed more than 1% to hit their highest level in over six years on Monday, as investors ran for the exits from the stock market following a sixth day of losses, knocking markets down 6% from their highs in that time, due to a raging trade war with China and unsatisfying Federal Reserve attempts to placate President Trump and investors. The lustrous metal is now handily over $1500, and investors are now seeing any price pullbacks as bargain-buying opportunities it seems. But does it make sense to wait a bit to confirm the rally is real?
Dave Nadig, managing director of ETF.com, explained on CNBC on Monday, “By the amount of gold in the vault, ETFs are about 80% below all time highs in terms of the amount they own, which was back in 2012. And we’ve got all sorts of new buying coming into the market to support this too. We’ve got central bank buying up 57%. We have all the short interest in the gold ETFs pretty much getting flushed out in July. So really all you’ve got is demand from folks who are looking for safe haven assets on days like today.”
Don’t buy into this rally yet, said Craig Johnson, chief market technician at Piper Jaffray.
“It’s starting to get a little bit ahead of itself,” Johnson said Thursday on CNBC. “I would trade it this way – I’d wait for this stock, take profits here and now, wait for it to pull back to about $130 on the GLD, then I’d be a buyer on that pullback and confirmation of support.”
Nancy Tengler, chief investment strategist at Tengler Wealth Management, was a fan of buying gold in mid-July, and that bet has paid off as since then the GLD ETF has rallied 5%.
Nevertheless, Tengler is dubious that this is a true bull market.
“If I believe that slowing global growth is going to infect the U.S., that interest rates are going negative, then I buy gold,” Tengler said Thursday on “Trading Nation.” “If I think, as I do, that things will consolidate — we’ll ultimately get a China deal, not great, and equities will begin to rally and outperform — then you sell here, and invest in dividend-paying stocks.”
Investors who like GLD but are concerned about the expense ratio and cost of owning a gold ETF, an alternative is the GraniteShares Gold Trust (BAR).
For investors looking for more rapid gains, and willing to bear the risks associated with a pullback however, there are two leveraged 3X gold ETFs to consider:
The Direxion Daily Gold Miners Index Bull 3X Shares (NUGT) seeks daily investment results, before fees and expenses, of 300% of the performance of the NYSE Arca Gold Miners Index. There is no guarantee the fund will meet its stated investment objectives.
This leveraged ETF seeks a return that is 300% of the return of its benchmark index for a single day. The fund should not be expected to provide three times or negative three times the return of the benchmark’s cumulative return for periods greater than a day. NUGT has an expense ratio of 1.23% and is currently up 85.37% as of June 27, 2019.
Meanwhile, the Direxion Daily Junior Gold Miners Index Bull 3X Shares (JNUG) seeks daily investment results, before fees and expenses, of 300% of the performance of the MVIS Global Junior Gold Miners Index. There is no guarantee this fund will meet its stated investment objectives.
This leveraged ETF seeks a return that is 300% of the return of its benchmark index for a single day. The fund should not be expected to provide three times or negative three times the return of the benchmark’s cumulative return for periods greater than a day. JNUG has an expense ratio of 1.17% and is currently up 81.34% as of June 27, 2019.
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