Direxion Shares Exchange Traded Fund Trust might be stuck in a range in the next couple of days as gold enters range-bound movements after the recent rally in the yellow metal stalled. Gold prices touched a 3-1/2 high last week before the rally stalled on Friday. The dip continued on Monday when the yellow metal had a 0.9% haircut to mark the largest single session loss since Sept. 30. However, it seems that the bullion is edging up today as the market defines a new range level.
This morning, spot gold was up 0.4% at $1,175.48 per ounce while U.S. gold for Dec. delivery gained $3.20 to $1,176.00 per ounce. The uptrend recorded in gold prices today can be traced to solid lending data that gives the Euro an edge to rebound – thereby weakening the dollar. On Monday, it was hinted that you should pay attention to Forex to trade the Direxion Shares Exchange Traded Fund Trust .
Uncertainties return to the gold market
The drop that was seen in the bullion market yesterday and the gains that were recorded today can be traced to the new clouds of uncertainties building on the horizon. To start with, the ECB has a meeting this week, during which it would clarify its stance on the monetary policy for the EU. The monetary policy in the EU will determine how the dollar trades against other currencies, which would in turn affect the demand for the yellow metal.
Fawad Razaqzada, technical analyst at Forex.com says, “It remains to be seen how these assets will behave during and after the European Central Bank’s presser on Thursday”. He goes on to say, “The EUR/USD could fall sharply if Mario Draghi talks up the possibility of expanding the size and duration of its asset purchases program… This scenario should be good news for stocks and the dollar, and bad for the buck-denominated gold.”
Secondly, there are concerns about how the U.S. Federal Reserve would act in raising the interest rates. ING analyst Hamza Khan says, “What’s changed between July and today is that a Fed hike for 2015 has now been written off”. He goes on to shed light on the different dynamics of the fed rate hike situation and how it could affect the bullion. In his words, “What’s preventing us from moving much above or below $1,170 is that we still don’t know whether the rate hike is going to be in early 2016 or late 2016, or how big it’s going to be”.
Gold bulls have the long case
Investors in the Direxion Shares Exchange Traded Fund Trust might want to rest in the knowledge that the long case stands for gold. Jameel Ahmad, chief market analyst at FXTM says, “Although gold has made strong gains throughout October, I still think that the metal has potential to continue trading higher before the end of the year. U.S. interest-rate expectations for 2015 are not only diminishing as each trading week passes, but also being pushed further back into 2016 with this providing encouragement for investors in gold,”