The S&P 500 was up 3.11% in July, bringing its YTD return to 19.52% as equities continue to rally. This could have spurred an outflow in gold exchange traded funds (ETFs), but prices held steady amid the sell-off.
The macroeconomic environment, with higher yields and a relatively strong dollar amid high rates, continues to put downward pressure on gold prices. Nonetheless, gold is still up 5% for the year despite a World Gold Council report noting that “the global ETF market saw its holding drop by 34 tonnes, valued at $2.3 billion,” which represents “the fourth straight month of liquidation in the gold market,” according to Kitco News.
“Overall, global gold y-t-d flows were -US$4.9bn at end of July, a cumulative reduction of 84t in holdings,” the report said further, with Kitco News adding that “due to resilient prices, assets under management actually increased by 2% to $215 billion.”
Other factors could still support the case for gold, such as the threat of a recession, which could always spur a flight to safe haven assets. Whether the market pushes gold prices higher or pushes them lower, traders have options with leveraged ETFs.
Bearish Gold Miner Rises
As gold prices continue to work themselves out through the second half of 2023, the Direxion Daily Gold Miners Index Bear 2X Shares (DUST) rose close to 5% in the past month. 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 modified market-capitalization-weighted index comprises publicly traded companies that operate globally in both developed and emerging markets, and primarily involve themselves in mining for gold and, to a lesser extent, silver.
Of course, traders will want to continue watching how incoming inflation data and Fed rates will affect market sentiment. With ETF products from Direxion Investments, traders can shift to the bullish side and remain agile if gold prices rise. One opportunity to play this is the Direxion Daily Gold Miners Bull 3X ETF (NUGT).
“The U.S. jobs market is slowly cooling, and that’s exactly what the Fed wants to see,” said Adam Button, chief currency analyst at Forexlive.com, in the aforementioned Kitco News report. “The market is increasingly comfortable that we are at the terminal rate in Fed funds. When that’s confirmed, I think the only place for interest rates to go is down, which is bullish for gold.”
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