Direxion Shares Exchange Traded Fund Trust is set to get a significant uptrend in its trading price today once the markets open for trading. U.S. markets were closed yesterday for Independence Day holiday but the holiday didn’t stop gold from climbing to new highs. The yellow metal has been enjoying strong bullish vibes in the last couple of weeks after Britain voted to leave the EU.
It is no longer news that the “Brexit” has changed the world forever – a sense of uncertainty hangs over the global financial markets.
Gold climbs to highest point in two years
While U.S. investors in gold and Direxion Shares Exchange Traded Fund Trust were away on Monday, the bullion climbed to its highest price in two years. On Monday, Gold for August deliveries climbed 0.72% to $1,352 an ounce in European trade to mark its highest trading price since mid-march 2014. One of factors that pushed the bullion to new high is the words of Mark Carney, Bank of England Governor.
Last week, Carney hinted that the Bank of England might need to set up stimulus measures to prevent a financial apocalypse in the UK. The stimulus package becomes necessary after the pound fell to its lowest point in 31 years. He says, “In my view, and I am not prejudging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer.”
In addition, analysts have observed that a new wave of stimulus might sweep across Asia in the next couple of weeks. The Chinese economic data that was released last Friday shows a four-month decline in manufacturing activities in the country. The massive drop in manufacturing activities could force Beijing to adopt stimulus measures. Eugen Weinberg, an analyst at Commerzbank notes that “Despite the stronger U.S. dollar, the sentiment on the markets is friendly for gold, given the monetary policy to be expected.”
The bullish case for gold shines brighter amidst financial gloom
Many analysts think this is a great time to buy gold and its derivatives such as the Direxion Shares Exchange Traded Fund . Juerg Kiener, managing director and chief investment officer at Swiss Asia Capital observes that gold prices are on track to touch all-time highs in the next 18 months.
He took issue with negative bond yields and dwindling trust in governments’ ability to keep economies afloat. He says, “This fall-off in trust is resulting in people looking at different ways to invest, particularly in an environment when the government controls the whole fixed income market, which is negative. At least (in gold), you don’t have negative yields, there is no new supply…and falling production.”
However, some folk on Wall Street are choosing to err on the side of caution with gold. Some analysts have hinted that it might be smart to await the U.S. Federal Reserve June meeting and June jobs data before buying gold.
Nonetheless, James Moore, an analyst at FastMarkets observes that the bullish thesis of the yellow metal can’t be erased overnight. He says, “there’s still a lot of safe-haven buying going on… We’ve had the comments from Mr. Carney, and there’s also been a backwards shift in U.S. monetary policy expectations, which is having a knock-on effect on gold.”