Supply Concerns, Demand Uncertainty Could Push This Metals/Mining ETF Higher

Supply concerns and uncertain market demand will weigh heavy on metals and mining. A hawkish U.S. Federal Reserve will also provide additional market forces on metals that could counter any bullish tailwinds.

“Demand uncertainty amid fears of global recession and interest rate hikes in the United States and Europe weighed on investors’ risk appetite,” a Mining Weekly article mentioned.

Of course, the Federal Reserve will continue to be a driving factor when it comes to market reactions these days. With inflation fears dissipating, but giving way to forecasts of a recession, it could provide a catalyst for metal mining.

That’s especially the case if a recession can spur more investors to the safety of precious metals. As such, this will have a spillover effect that should also prop up precious metals mining.

“The US dollar has found support in recent sessions as several Federal Reserve officials reiterated an aggressive monetary tightening stance ahead of the Fed’s Jackson Hole, Wyoming, symposium this week,” the article added. “A strong dollar typically places downward pressure on commodity prices as it becomes more expensive for non-US holders to buy.”

Amplified Metal Mining Exposure

Traders looking to play moves with added leverage to match their conviction can look to leverage exchange traded funds (ETFs) such as the Direxion Daily Metal Miners Bull 2X Shares (MNM). Like all leveraged Direxion ETF products, the fund provides tactical exposure to a long bias in metal mining in the convenience of an ETF wrapper.

The fund, which is up over 100% for the year, seeks daily investment results, before fees and expenses, of 200% of the performance of the S&P Metals and Mining Select Industry Index. The index is a modified equal-weighted index that is designed to measure the performance of the equity securities of companies in the S&P Total Market Index that are classified by the GICS as being in the metals and mining industry.

The metals and mining industry includes companies in the following sub-industries: aluminum, coal & consumable fuels, copper, diversified metals & mining, gold, precious metals & minerals, silver, and steel. The index does not include metal commodities.

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