The first rate cut of the year added further fuel to the gold rally flame that continues to burn. Additional cuts can only push gold, as well as gold miners, to record levels.
Gold continues to make new highs, recently breaking through the $4,000 price barrier. Ongoing market uncertainty around inflation, tariffs, and geopolitical risks continue to add more upside for gold as investors seek safe haven assets.
“Gold is hovering near record highs as investors weigh mixed signals from the Fed on inflation and jobs,” said Matt Britzman, a senior equity analyst at Hargreaves Lansdown.
Additional rate cuts could certainly be a future catalyst, but the pace of rate cuts remain in question. Nonetheless, a confluence of the aforementioned market factors continue to support the case for gold’s bullishness.
“Powell’s cautious tone was echoed by divided views across the committee, keeping rate cut expectations alive ahead of August’s PCE print, the Fed’s preferred measure of inflation,” Britzman added. “Add in rising geopolitical tensions and strong ETF inflows, and gold’s appeal is holding firm despite the policy fog.”
2 Options to Trade Miners
In addition to trading gold ETFs that track spot prices, another option is miners. As gold demand rises, miners can can benefit from a latent move towards the upside after prices of the precious metal have already risen. This gives miners an element of predictability, to a certain degree.
With that, Direxion has a pair of gold mining ETFs that offer leverage for traders to maximize their profit potential. One option is the Direxion Daily Gold Miners Bull 2X ETF (NUGT). It 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.
Rate cuts can also benefit small-cap stocks, as most of these companies rely on debt in order to fund their operations. In turn, lower interest rates can reduce costs associated with debt servicing. Whenever the broad market is trending higher, small-cap companies may make amplified moves to the upside. They can also carry a higher degree of volatility, but traders who don’t mind the additional market fluctuations can consider the Direxion Daily Jr Gold Miners Bull 2X ETF (JNUG). The fund gives 200% exposure to the daily performance of the MVIS Global Junior Gold Miners Index. That index tracks the performance of foreign and domestic micro-, small- and midcap companies that generate revenue from mining or similar activities.
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