Higher-for-longer interest rates may have stumped gold temporarily. But recent geopolitical events have pushed the metal higher as safe haven demand increased. An additional catalyst that’s been keeping the precious metal bullish has been central bank buying.
Global investment firms like Morgan Stanley are bullish on gold equities as demand for the precious metal is rising. As mentioned, central bank purchases may have a hand in that bullish sentiment. That’s because purchases in 2023 could exceed the previous year.
“A big buyer of gold has been central banks and it is possible that, in 2023, those purchases could exceed those from last year,” Yahoo Finance noted.
Of course, gold’s demand will continue to center around its safe haven asset status. According to FX Empire, uncertainty continues to cast a shadow on the capital markets as 2023 winds down, which will only bolster demand for gold and ancillary services that support the precious metal industry like mining.
Much of that uncertainty stems from the ongoing guessing game of what the U.S. Federal Reserve will do with interest rates.
“As we transition through the final quarter or 2023, the list of known risk factors is expanding. That’s before any unknown unknowns crop up,” FX Empire noted. “A growing consensus of traders are convinced that another rate hike is hard to justify in this increasingly uncertain economic and geopolitical environment that we find ourselves in right now.”
“During times like these, finding a safe place to store money becomes particularly important, which would explain why gold is everyone’s favourite ‘go-to’ safe-haven,” FX Empire added, noting that any price drops in gold “should be viewed as buying opportunities because prices won’t stay low for long!”
Trade Dips With Leveraged Gold ETFs
When a buying opportunity presents itself for retreating prices, traders can use miners as a backdoor play for fluctuating prices. One to consider is the Direxion Daily Gold Miners Bull 2X ETF (NUGT).
The fund 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 and are involved primarily in the mining for the precious metal.
Another option is 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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