Direxion Shares Exchange Traded Fund Trust is set to continue its bullish ascent this week. The gold-backed ETF has been soaring in response to increased safe-haven demand for the yellow metal. You’ll remember that Britain voted to leave the EU last Friday in an historic referendum that changed the world. The success of the Brexit vote has thrown up much uncertainty and instability into the financial markets; thereby making gold shine brighter.
Gold extend gains as effects of Brexit start to sink in
Last Friday, the yellow metal gained a massive 4.8% to mark the biggest single-day rally since January 2009. The Direxion Shares Exchange Traded Fund Trust also gained a massive 17.57% to close at $114.01 in response to the rally in the bullion last Friday. After the Brexit vote, the Pound Sterling crashed to its lowest level in 31 years. The resignation of British Prime Minister, David Cameron further worsened the effects of the Brexit on the financial markets.
The global financial markets are opening to a new reality of volatility and instability today and British finance minister, George Osborne is schedule to provide a statement on “financial and economic stability” in the U.K. Nonetheless, investors are rushing into the yellow metal to take up defensive positions ahead of the upcoming financial turbulence.
This morning in Asia, spot gold was already up 1.5% to $1,335.30 an ounce. U.S. bullion for August delivery was trading up 0.6% at $1,330.80 an ounce. The new bullish trend in the bullion might extend for the next couple of weeks. ANZ commodity strategist Daniel Hynes says, “In the next week or two, we think gold could push towards $1,400”.
Madhavi Mehta, an analyst at Kotak Commodity Services Ltd says, “Gold is still supported by safe haven buying.” She goes on to say that the bullish prospects of the bullion in light of Brexit will become more pronounced. In her words, “the event is done and market reaction has subsided, however there are still many questions left unanswered. In this kind of uncertain economic atmosphere, safe haven assets like gold and yen may remain supported.”
Jim Rogers goes contrarian to back dollar over gold
Direxion Shares Exchange Traded Fund Trust is enjoying bullish tailwinds because investors are buying gold. However, veteran investor, Jim Rogers is going contrarian by betting on the U.S. dollar instead of the bullion. Rogers opines that the yellow metal is coasting on sentiment and that the price of the bullion could be significantly lower by the end of the year. He says, “Gold has been staggering this year, went straight up, and I don’t like to buy anything that’s run straight up.”
Rogers went ahead to express his support for the greenback instead of the bullion. He says, “I would prefer to buy the dollar as a haven than gold.” The greenback and the bullion tend to have an inverse relationship in which gains in the one often leads to losses in the other. However, Rogers say, “I can’t get too optimistic about something that’s been going straight up (gold)”. Expressing his support for the greenback he says, “the dollar hasn’t done that, and often in history, when the dollar goes up, gold is weak.”