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Direxion Shares Exchange Traded Fund Trust (NUGT) and Gold Hold Steady after Jobs Data

Direxion Shares Exchange Traded Fund Trust (NUGT) Gold

The U.S. job data for June slowed down the uptrend in gold last Friday but the Direxion Shares Exchange Traded Fund Trust still ended the session with 9.55% gains at $166.68. The U.S. job growth reported in June suggested that manufacturing employment has increased and the economy is on a faster pace to recovery.  Last week, the yellow metal had its longest weekly winning streak since July 2011 after the demand for gold increased across the global markets.

Direxion Shares Exchange Traded Fund Trust (NUGT) Gold

The Brexit vote has shaken the foundations of the Euro zone and investors in the continent have been seeking refuge in the yellow metal. The dismal May jobs report has also weakened the economic outlook in the U.S. However, the June jobs report altered the narrative about fears of an impending economic doom in the U.S. The BLS reports that U.S. employers added 287,000 jobs in June to mark the highest job growth since October 2015. The best part is that nearly every sector of the economy recorded significant job growth.

Gold back to winning ways despite strong jobs report

The impressive June jobs reports suggests that the dismal jobs number recorded in May was an anomaly.  U.S. employers added an average of 196,000 jobs in the first quarter and 147,000 jobs in the second quarter.  Following the decent jobs gain in June, Wall Street is divided about when the Fed might want to consider raising interest rates. Ethan Harris, an economist with Bank of America Merrill Lynch observes that the fed is “in an extremely conservative mood… They’re very risk-averse…  They’re very concerned about prematurely hiking.”

The impressive jobs report is already had an effect on gold early this morning but the bullion was quick to cast off the weakness.  This morning, Reuters reported that the bullion was trimmed lower after the dollar steadied and equity markets found a reason to rally. Spot gold was down 0.3% to $1,362.35 an ounce from a session high of $1,376.50 in Asia.

However, the bullion was back on its feet by the time U.S. markets opened. U.S. gold was up 0.4% at $1,363.90 an ounce and the Direxion Shares Exchange Traded Fund Trust was holding steady with 0.19% gains at $167 by midday.

Gold has unlimited upside ahead

The decision (or indecision) of the fed about interest rates is one of the major factors affecting the price of gold and the Direxion Shares Exchange Traded Fund Trust . If the Fed raise interest rates, the bullion is likely to trade lower because investors will flock to other income-bearing assets. In contrary, the fed’s delay in raising the interest rate is providing the bullion with bullish tailwinds.

Tom Covin, a Wall Street trader told CNBC that the yellow metal has unlimited upside potential ahead. He noted that “a confused Fed, saying one thing but doing another over and over invites buyers of gold to jump into the pool with both feet and they have.” He also noted that “the Fed’s inability to secure more rate hikes, or even convince the market they were coming , fueled the rally we are seeing.”

Another analyst with Ambrosino Brothers  observes that “the year-to-date rally in gold has been nothing short of spectacular, benefiting from what we have seen as a ‘confused Fed’ or a Fed lacking action.”

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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.