Not DUST In The Wind: Perhaps The Best Gold Miners ETF

Punished by the stronger dollar and the specter of the Federal Reserve boosting interest rates, something that could happen as soon as this week, gold and the relevant exchange traded funds have struggled this year.

For example, the SPDR Gold Shares GLD, the world's largest ETF backed by holdings of physical gold, is down nearly seven percent year-to-date. Things have been far worse for the ETFs holding shares of gold miners. The largest such fund, the Market Vectors Gold Miners ETF GDX, has plunged 28.6 percent this year, a loss that is more than quadruple that of GLD's.

For risk-tolerant traders, GDX's woes and those of rival gold miners ETFs are not bad news. Actually, those struggles are good news for traders with the fortitude to embrace the Direxion Daily Gold Miners 3X Bear Shares DUST, the triple-leveraged inverse answer to GDX. DUST attempts to deliver three times the daily inverse performance of the NYSEArca Gold Miners Index, GDX's underlying benchmark.

GDX's 2015 struggles have translated to a 27.1 percent year-to-date gain for DUST, though that is not an endorsement for holding DUST over the long-term, which is not a good idea. DUST's nearly 20% fall from its August peak proves as much. Underscoring DUST's volatility and how rapidly the ETF can rise (and fall) is the fact that the ETF has endured that tumble and is still up 86 percent over the past 90 days. 

Even with that massive 90-day run, DUST may have more upside in store for active traders. DUST “is developing a positive trend. RSI as a gauge of short-term momentum is trending higher. It’s currently at 60.15, well above the August high of 58.4. The MACD provides another confluence as this trend indicator is currently above the zero line with a consistent increase in spread vs the signal line,” according to a Direxion note.

Indeed, DUST is rebounding from its August tumble. The ETF entered Tuesday with a September gain of more than 24 percent, making it Direxion's second-best bearish triple-leveraged ETF on a month-to-date basis, according to issuer data. 

Further validating the potential for more near-term upside in DUST is flows data, which continue indicating traders are departing DUST in favor of GDX and the Direxion Daily Gold Miners Bull 3X Shares NUGT, DUST's bullish counterpart. This is validation because as GDX and its rivals have slumped for going on three years now, inflows to bullish gold miners ETFs have served as indicators that investors and traders were hunting for bottoms that have yet to be found. 

“Year to date DUST has seen a notable $117 million vacate the fund via redemptions likely on profit taking into the recent Miners slump, but then again NUGT has seen substantial inflows of more than $800 million year to date in spite of continued pressure on Mining names,” said Street One Financial Vice President Paul Weisbruch in a note out Tuesday.