Direxion Shares Exchange Traded Fund Trust might cause investors mark down this month as an October to remember as gold took some hammerings in the last couple of weeks. The yellow metal is already on track to close the session and the month near a three-week low price; this marks the biggest weekly drop in the last nine weeks. The price of the bullion has retreated by almost 1.4% this week on the heels of hints by the Feds that a Dec. rate hike is still in the books.
Spot gold was slightly up 0.06% to $1,148.00 an ounce at midday – to regain some of the loss from the 2.5% loss at the end of Thursday’s session. Gold has dropped to its lowest point in three months earlier this month on Oct 09, when it dropped to $1,144.01 an ounce. However, the Direxion Shares Exchange Traded Fund Trust is up 2.71% to $36.80 today and the ETF has gained 35.20% in the last one month.
Gold has had a bad month, but it could have been worse
Despite all the noise about how gold has lost its appeal as a safe-haven asset, it doesn’t appear as if the yellow metal has suffered much in the last one month. Mitsubishi analyst Jonathan Butler thinks that the yellow metal has seen the worst already, at least in the short term. In his words, “the correction was a perfectly natural response to that. (But) it’s interesting that we’ve only traced back to where we were in early October. There may be further pain to come as the Fed’s intentions becomes clearer, but with yields having moved higher, probably the worst is over in the very short term.”
However, other analysts are not so bullish about the prospects of the yellow metal. For instance, Societe Generale analysts in a note covered by Reuters noted that, “The reality of tightening U.S. monetary policy is still set to strengthen the U.S. dollar and see Treasury yields rise… “Against this backdrop we still expect both gold and silver to drop markedly.”
You are better off with gold ETFs than the actual metal
Gold has managed to stay afloat in the last couple of weeks despite the wild swings induced by the fear of interest rates. Carsten Menke, a commodities research analyst at Julius Baer says, “The rally was driven by shifts in sentiments: from overly bearish in summer, to bullish in September”. He offers a solution that might end the wild swings in saying, “To receive lasting support, the market should get not short-term speculative drivers, but solid increase in investment demand for gold [as a safe haven].”
Gold ETFs have their pros and cons, and you need to ensure that you have done your due diligence and examined all the risks before making any investment decision. Investors in the Direxion Shares Exchange Traded Fund Trust would have recorded a better Oct. than folks who have actually bought into the bullion. In the last one month, the yellow metal has gained 2.57% while the Direxion Shares Exchange Traded Fund Trust has gained 35.20%.