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Direxion Shares Exchange Traded Fund Trust (NUGT) Is Stuck Until Gold Crosses $1,300

Gold (NUGT)

Direxion Shares Exchange Traded Fund Trust is maintaining its bullish vibe today as it creeps up with 4.78% gains at to $102.50 as at 11:00AM EDT. The gains in the ETF today can be traced to renewed bullish sentiment on the yellow metal. Yesterday, I wrote about how ETFs tracking the yellow metal has decent upside potential ahead because of the impressive uptrend in the demand for the bullion – global demand for gold jumped more by 21% Y-O-Y in the first quarter.

Gold (NUGT)

Gold might be weakened by stronger dollar ahead of U.S. data

The US Dollar jumped to a two-week high against a basket of currencies today and the gains in the greenback today mark the best fortnightly performance in the last three months. However, a strong dollar often exerts downward pressure on the bullion because gold in priced in USD and a stronger dollars makes gold expensive for non-US buyers.

Based on the gains in the dollar, the bullion seems to be stuck in a narrow range after it had made 1% gains earlier in the session. Spot gold was maintaining 0.7% gains at $1,277.66 as at 1216GMT after it has crashed by more than 1.1% on Thursday. Gold for June delivery was also managing to gold on to gains of 0.2% at $1,274.40 an ounce earlier in the session.

The bullion is not likely to show strong bullish trends today because investors are taking a cautious stance ahead of the economic data due today. The market is in anticipation of U.S. retail sales, which might provide indications about the state of the U.S. economy. If retails sales data is better than expected, one could easily argue that the U.S. economy is improving; weakness in the data suggests that the U.S. economy still has a long way to recovery.

The economic data could also force or stay the hand of the U.S. Federal Reserve on its plan to raise interest rates twice this year. Deutsche Bank analyst Michael Hsueh notes that “The move (in the gold price) this year has really been down to the shift in the U.S. policy expectations…  It’s more about when we start to see any improvement in U.S. data that could push the pendulum the other way and push the dollar higher.”

$1,300 remains a large hurdle for the bullion

Direxion Shares Exchange Traded Fund Trust i s up today but the bullion is still down 1.8% for this week. Gold touched $1,303 last week but the yellow metal has quickly retraced its steps because it was unable to find support that psychological barrier of $1300. Analysts believe that the bullion will continue trading in a range supported at $1,250 until the bullion builds up enough momentum to break out above the bar.

Nicholas Colas, chief market strategist at global brokerage Convergex notes that “precious metals have outperformed financial assets by a wide margin this year, and their correlations to stocks are unsurprisingly negative for the trailing 30 days,”

Analysts at The 7:00 Reports that “Gold is holding initial support at $1,260, and the potential for a breakout through $1,300 is growing as the broader trend is still higher… Even so, a close above $1,300 is still something we would like to see to help confirm the direction of the trend,” they said.

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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.

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