Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) is likely to see some volatility ahead as the view of analysts and the actual market result seems to be odds. MarketWatch reports that Ashraf Laidi, a London-based currency strategist, posted a chart to showing a rare bullish setup in the stock market. If the market goes on to act in line with the thesis of the chart, U.S. stocks should soar and gold investors can breathe a sigh of relief as the market forgets the brouhaha about raising of interest rates.
The component of the chart shows that the volatility gauge is set to show a rare bullish pattern known as the “golden cross”. The “golden cross” is the opposite of the “death cross” pattern – stock usually plummet after a death cross and analysts believe that stocks soar after a golden cross. An interesting point is that sightings of “golden crosses” are few and far between – the last “golden cross” was seen in 2007.
Golden cross set to give gold prices a push
If the market stays true to the golden cross and stocks soars, the Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) and gold investors can expect the peace in the gold market to continue. You’ll remember that the decision by the feds to stay put on interest rates has eased some of the tension in the market. Erik Swarts of the Market Anthropology blog notes, “the news cleared the way for gold to stretch its legs in a market environment that should broadly support the reversal.”
Lukman Otunuga, a research analyst at FXTM seems to agree with the view that gold is set for bullish push in the next couple of days. He believes that the weakness being recorded in the U.S. dollar should ignite an increase in the physical demand for gold. In his words, “The dollar weakness may provide the fuel needed to aid gold bulls to push the metal toward the next key resistance level at $1,145/oz”.
A layer of uncertainty remains
Despite the growing optimism about where gold prices are headed, the actual market situation shows that investors are slightly cautious. The Wall Street Journal reports that gold prices were a bit lower in European trade this morning as investors found it hard to make up their minds on bullish or bearish calls. It was reported that spot gold was down 0.02% at $1,138.72 in London this morning as it alternates in a tight +/-$3 range.
Investors in gold and ETFs such as the Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) are probably being cautious because of uncertainties about what the Fed will next. David Govett at Marex Spectron, in a note said, “Over the weekend, various Fed members intimated that they would like to see a rate rise this year and this should keep a lid on any gold rally for the moment”.
On Monday shares in the Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) were down by more than 5 percent as the market tried to price the Fed moves into the stock market.