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Some Say The Gold Miners Trade Is Back

ETF Professor

At this writing late in Friday's session, the Direxion Daily Gold Miners Bull 3X Shares (Direxion Shares Exchange Traded Fund Trust (NYSE: NUGT)) is down nearly 10 percent, while its small-cap counterpart, the Direxion Daily Junior Gold Miners Index Bull 3X Shares (Direxion Shares Exchange Traded Fund Trust (NYSE: JNUG)), is lower by a similar amount.

Underscoring just how much gold and gold miners have rallied in a short time frame, JNUG and NUGT could each endure 10 percent losses Friday and still head into the weekend with an average month-to-date gain of nearly 115 percent.

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The Bulls And The Bears

Obviously, Friday's performances cast a pall over JNUG and NUGT, perhaps emboldening fans of the Direxion Daily Gold Miners Bear 3X Shares (Direxion Shares Exchange Traded Fund Trust (NYSE: DUST)) and the Direxion Daily Junior Gold Miners Index Bear 3X Shares (Direxion Shares Exhcnage Traded Fund Trust (NYSE: JDST)) to add to those losing positions. While NUGT and JNUG are Direxion's top two bullish leveraged ETFs to this point in February, DUST and JDST are two of the issuer's worst bearish funds this month.

Even with Friday's gains of around 10 percent, DUST and JDST are each still down more than 58 percent this month. Friday is just one day, but it serves as a reminder that the gold miners ETF is definitely back and has been for much of this year.

“We’ve noticed an increase in volume and interest in our gold miners leveraged ETFs. And it’s no surprise. China’s economy and plummeting oil prices have been the lead stories when it comes to investing headwinds. The alarming slowdown in the world’s second largest economy and a relentless slide in crude oil are intensifying fears of a global malaise and deflation,” said Direxion in a new note.

Activity On The Rise

Indeed, activity in the aforementioned ETFs is on the rise. On Thursday, traders pulled more than $20.6 million from NUGT, a day after yanking nearly $50.8 million from the ETF. Also, on Wednesday, traders added $20.2 million to DUST.

For the five-day period ended February 25, volume in JDST and DUST was 61 percent and 35.2 percent, respectively, above the trailing 20-day average, according to Direxion data. Traders appear so convinced that the gold miners rally will end that DUST's average daily inflows for the past 30 days are $11.8 million, according to issuer data.

“Increased volatility and uncertainty have rekindled the demand for gold as a hedge against market turmoil. As a result, gold bullion has gained nearly 15 percent in the year-to-date time frame (through 2/19/16), and is easily outperforming the broad market indices and other safe-haven investments like Treasuries,” added Direxion.

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