Gold 's Rally Has This Popular ETF Shining

Gold and the related exchange-traded funds are breaking out and miners are going along for the ride. With the yellow metal residing at multi-year highs, investors are pouring gold miners exchange-traded funds, good news for some of the leveraged funds in the group.

What Happened

Of course, the Direxion Daily Junior Gold Miners Index Bull 3X Shares JNUG is getting in on the act. JNUG, which tries to deliver triple the daily returns of the MVIS Global Junior Gold Miners Index (MVGDXJTR), is higher by about 60% over the past month.

“Investors are finding refuge in gold and the companies that produce the metal as financial markets get whipsawed by the escalating trade war between the U.S. and China,” according to Bloomberg.

As a leveraged ETF, JNUG is not a source of refuge. If anything, it thrives on the aforementioned whipsaws, but traders are piling into the fund.

Why It's Important

Entering Wednesday, JNUG was the top performer on a month-to-date basis among Direxion's leveraged bullish ETFs. With a 6.32% gain yesterday, JNUG is higher by 34% this month, putting it about 300 basis points ahead of its large-cap counterpart, the Direxion Daily Gold Miners Index Bull 3X Shares NUGT.

The money hasn't been easy for traders because JNUG has been far away the most volatile of Direxion's leveraged bull funds over the past month, but that isn't keeping traders away and that may be why some traders are taking profits in the fund.

For the 10 days ending Tuesday, Aug. 6, traders yanked almost $16 million from JNUG, according to issuer data. That isn't surprising as it is appropriate to take profits in leveraged ETFs, particularly ones as volatile as JNUG, as they rise.

What's Next

What is interesting is traders' affinity for JNUG's bearish cousin, the Direxion Daily Junior Gold Miners Index Bear 3X Shares JDST. Over the past 10 days, traders have allocated $28.6 million to the bearish JNUG, good for the third-highest total among Direxion's leveraged ETFs.

As JDST's 29.46% loss over the past week confirms, being short miners with leverage when gold rises can be a punishing trade.

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