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Leveraged Gold ETFs Gain on Tame Inflation Data

This article was originally published on ETFTrends.com.

On Friday, inflation data met expectations, which kept the U.S. dollar in check and allowed leveraged gold ETFs like the Direxion Daily Jr Gld Mnrs Bull 3X ETF (JNUG) and Direxion Daily Gold Miners Bull 3X ETF (NUGTto post gains.

The consumer price index for December came in line with expectations--down 0.1 percent from November and up 1.9 percent, year-on-year--marking the first decline in nine months. Meanwhile, the cost of living increase over the past 12 months slowed to 1.9 percent from 2.2 percent, representing the first time it’s dropped below the 2 percent since August 2017.

“Overall, inflation risks remain well in check and are well down the list of potential concerns for both the capital markets and the economy,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “That bodes well for 2019 if the Fed can slow the pace of rate hikes or pause outright.”

The  latest inflation data prevented gains in the U.S. Dollar Index (DXY), while JNUG rose 1.14 percent and NUGT gained 2.71 percent.

Looking at the one-year chart, both JNUG and NUGT have benefitted in the recent dollar weakness as both ETFs are heading upward towards the 200-day moving average:

Leveraged Gold ETFs Gain on Tame Inflation Data 1

“The buying we’re seeing come in is cautious,” said Bob Haberkorn, senior market strategist at RJO Futures. “People are buying it mostly because of what’s going on with the Federal Reserve. That’s a different type of buying.”

Time to Buy?

Despite all the headwinds gold has had to face in 2018, some analysts feel that gold has weathered the storm and presents a prime buying opportunity in 2019.

“Faced with rising interest rates and new record highs in the stock market, gold has done remarkably well in 2018, especially as consumer demand weakened even as mining output sets a new all-time high,” said Adrian Ash, director of research at BullionVault. “Supporting the gold market all through 2018, the geopolitical backdrop is worsening again, keeping (exchange-traded fund) positions firm and catching any dips in the price with new buying.”

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