Amid the drop in the major indexes last week, defensive plays were abound in precious metals, particularly gold. ETFs like the SPDR Gold Shares (NYSEArca: GLD) and SPDR Gold MiniShares (NYSEArca: GLDM) saw gains.
Gold prices hit a low of $1,280.91 last Thursday, which almost touched a five-week low for the precious metal earlier this week. U.S. gold futures gained 0.6 percent as more investors are looking to stem the tide with safe-haven assets should a global economic slowdown materialize.
“We are seeing a bit of short-covering on a Friday ahead of the non-farm payroll numbers from America,” said David Govett, head of precious metals at Marex Spectron.
“The expectation is for a slowdown (in the jobs data), and if that happens it is certainly a bullish signal for gold only because it is slightly bearish for the dollar,” said Govett. “If the numbers are in line or worse-than-expected, gold could rally above $1,300.”
Traders were also quick to jump on miners as the VanEck Vectors Gold Miners (NYSEArca: GDX) gained 1.19 percent. For the non-risk-averse, the Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG) rose 5.87 percent and the Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT) gained 3.68 percent.
“We think gold prices are going to continue to go higher on the back of a weakening dollar,” said Natixis analyst Bernard Dahdah. “Growth in the U.S. is going to slow as the country has reached full employment and productivity is very high so there isn’t much space for growth… And we are coming to an end of the Federal Reserve’s rate cycle which should weaken the dollar further.”
Can gold hit the $1,400 price mark?
For investors looking for continued upside in U.S. cyclical sectors over defensive sectors, the Direxion MSCI Cyclicals Over Defensives ETF (NYSEArca: RWCD) offers them the ability to benefit not only from cyclical sectors potentially performing well, but from their outperformance compared to defensive sectors.
Conversely, if investors believe that U.S. defensive sectors will outperform cyclical sectors, the Direxion MSCI Defensives Over Cyclicals ETF (NYSEArca: RWDC) provides a means to not only see defensive sectors perform well, but a way to capitalize on their outperformance compared to cyclical sectors.
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