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Gold Set for New Rally with U.S. Elections Ahead: Direxion Shares Exchange Traded Fund Trust (NUGT)

Gold Bars - Square NUGT - Gold Price

Gold started this week on a weak note after investors started taking profits off the table and the Direxion Shares Exchange Traded Fund Trust  dropped below $150. On Monday, the bullion dropped to a two-week low and it appeared that the weakness would continue throughout this week. Gold bulls were especially worried about how the waning effects of Brexit could affect the prospects of the yellow metal going forward.

Direxion Shares Exchange Traded Fund Trust (NUGT) Gold

More so, the last couple of economic data released have not provided investors with many reasons to be optimistic about where the yellow metal is headed. For instance, data on housing starts a better than expected increase in June to show that construction activity has improved. More so, the June jobs report showed U.S. employers beat estimates in the number of jobs added to prove that the weakness in jobs number in May was an anomaly.

Gold finds its footing with support at $1325

The price of gold is steady in the market today and the Direxion Shares Exchange Traded Fund Trust  is likely to fare better in the session. Spot gold was up 0.1% to $1,332.81 an ounce as at 0340GMT and gold for August delivery was up 0.1% to $1,331.73. However, James Gardiner an analyst with MSK observes that “technically, it looks like gold’s recent weakness is slowly coming to a halt with a base being formed around $1,325-35.

One of the reasons for the steadying in bullion prices today is that investors are slowly coming to terms with how the effects of Brexit could affect the global markets. On Tuesday, the International Monetary Fund (IMF) slashed its global growth forecast through 2018. The IMF notes that the uncertainties surrounding Brexit makes the global economic outlook cloudy in the short term.

Adrian Ash, head of research at BullionVault observes that “Gold flatlining so far this week proves again that geopolitics [don’t] move bullion prices, not like financial worries can.” Nonetheless, OCBC Bank analyst Barnabas Gan observes that “there are still some headwinds to growth and this may lift safe-haven demand should the implications of Brexit start to unwind.”

Miner says the rally is not over

The bullion has recorded 25% gains this year and the Direxion Shares Exchange Traded Fund Trust  is already up 489% in the year to date period. Many analysts think that the bullion has had a good run and that it time for a consolidation. However, Bill Beament, managing director at Australian mining firm, Northern Star Resources, observes that the rally in the bullion in far from over. Bill notes that the upcoming U.S. presidential elections will introduce a higher level of volatility into the market.

Boisterous Donald Trump and controversial Hillary Clinton are the two main contenders and the presidential race is akin to asking voters to chose to the lesser of two evils. Beament observes that that “the overall trend is up” because the election will be a catalyst for gold prices.  He went ahead to say that “It’s a longer-term trend heading upward because of what’s happening with the global economies around the world, it’s positive for gold.”

 

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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