In Monday’s early trading session, the euphoria of the capital markets on last week’s “phase one” trade deal may already be losing steam, especially when looking at steady gold prices. Rather than prices falling from a renewed risk-on sentiment, gold prices held, showing signs that bullish gold investors are skeptical of a the trade deal.
“Based on gold’s reaction, it appears the market is not very convinced about the deal… in the sense that this is not really a breakthrough in terms of lifting growth globally, in the U.S. or China,” said Julius Baer analyst Carsten Menke. “Gold market investors are still a bit skeptical about the growth outlook next year so they prefer to hold onto their positions.”
Positive news of a “phase one” U.S.-China trade agreement injected optimism back into investors, which tamped down gains for gold. However, gold did get a boost as a weaker-than-expected Producer Price Index (PPI) evoked some risk-off sentiment.
Traders looking to buy the dip can play gold miners and look at the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT), which makes a play on gold miners. NUGT seeks daily investment results, before fees and expenses, of either 300%, or 300% of the inverse (or opposite), of the performance of the NYSE Arca Gold Miners Index.
The index is a modified market capitalization-weighted index comprised of publicly traded companies that operate globally in both developed and emerging markets, and are involved primarily in mining for gold and, to a lesser extent, in mining for silver. The Index will limit the weight of companies whose revenues are more significantly exposed to silver mining to less than 20% of the Index at each rebalance date.
Traders looking to play a correlated asset can also look to the price movements in silver via leveraged ETFs like the VelocityShares 3x Long Silver ETN Linked to the S&P GSCI Silver Index ER (NasdaqGM: USLV) and the ProShares Ultra Silver (NYSEArca: AGQ).
USLV seeks to replicate, net of expenses, three times the S&P GSCI Silver index ER. The index comprises futures contracts on a single commodity. The fluctuations in the values of it are intended generally to correlate with changes in the price of silver in global markets.
AGQ seeks daily investment results that correspond to twice the daily performance of the Bloomberg Silver Subindex. The fund seeks to meet its investment objective by investing, under normal market conditions, in any one of, or combinations of, Financial Instruments (including swap agreements, futures contracts, and forward contracts) based on the benchmark.
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