Direxion Shares Exchange Traded Fund Trust is starting this week on an impressive note and investors who sought the exits last week might want to return as the outlook for gold brightens up. This morning, the ETF up 4.79% to $105.70 after it had touched an intraday high of $110.86. The main reason behind the gains in the ETF today is that analysts are convinced that the yellow metal is back to winning ways and the bullish sentiment is up.
The rise in bullish sentiment has pushed the yellow metal up in sharp contrast to the downtrend that the bullion suffered last week. This morning, spot gold was up 0.6% to $1,281.40 an ounce while gold for June delivery was trading up at 0.8% at $1,281.40) an ounce after it had touched an intraday high of $1,290.40 earlier in the session. Silver was also riding the bullish wave with spot Silver climbing 1.4% to $17.240 per ounce – more so, Platinum gained 0.8% to $1,056.20 an ounce.
Analysts make bullish bets on gold
Direxion Shares Exchange Traded Fund Trust has more than doubled this year after gold got off to its best start in 30 years – in fact, the yellow metal was the best performing commodity in the market at the end of the first quarter.
Analysts are starting to make vocal bullish bets on the outlook of the yellow metal. Mark To, head of research at Wing Fung Financial Group in Hong Kong notes that “In the second quarter, $1,300 to $1,400 is a fairly reasonable price for gold as the central banks are not going to raise interest rate any time soon… I think overall sentiment is very positive for the gold market.”
Nonetheless, Bob Haberkorn of RJO Futures thinks that gold is on a two-way street. In his words, “the moves that we’re seeing are shifting with sentiment with the equity markets…It’s a back-and-forth between flight-to-quality and risk-on”
Bullion holdings climb by 25%
To support the increase in the bullish sentiment for gold, Bloomberg reports that holdings in ETFs such as Direxion Shares Exchange Traded Fund Trust have jumped by 25% as investors respond to the policy actions by central banks. Data compiled by Bloomberg suggest that holdings have increased to 1,822.3 metric tons, the most since December 2013. More so, ETF holdings have been rising every day for the last two weeks to jump to 63.2 tons.
Bernard Aw, a strategist at IG Asia opines that economic policies such as negative interest rates and fears about devaluations have been buttressing the bullish outlook for the yellow metal. In his words, “firstly, the negative interest rate environment and quantitative-easing policies are reducing the pool of suitable investment options, and making gold less costly to hold… Second, lingering fears of competitive currency devaluations and potentially fresh bouts of market volatility encourage safe-haven demand.”
Gold has also benefited from fears stemming from economic uncertainty after economic data from China were weaker than expected. Data from China revealed that factory output and retail sales in the country were slower than expected in April to water down any hopes of a rapid economic recovery in Beijing.