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Gold: Direxion Shares Exchange Traded Fund Trust (NUGT) Gains as Kuwaiti Oil Returns

Gold NUGT

Direxion Shares Exchange Traded Fund Trust is back to winning ways after starting this week on a worrisome note because of weakness in global gold prices. As at 11:33AM EST, the ETF was up 3.44% $92.03 after it had touched an intraday high of $94.09. However, the gains in the yellow metal today can be traced the return to the status quo that has kept oil prices subdued because of a supply glut than dwarfs the demand.

Gold lumps

Today, news broke that oil workers in Kuwait have abandoned their strike and that they have returned to work in order for pay negotiations to commence. Oil had spiked earlier this week after news broke that Kuwaiti oil workers went on a strike and that oil production in the country has dropped almost 50%. The gains in oil had caused gold prices to weaken and the prospect of the yellow metal was worsened by profit-taking activities from investors.

Gold is back to winning ways

This morning the bullion found its footing in the international market in sharp contrast to losses in the previous sessions. Spot gold remained intact at $1,251.65 as the $1,250 support continues to hold. Bullion for June delivery was slightly up to $1,252.32 an ounce. As expected, gold ETFs such as the Direxion Shares Exchange Traded Fund Trust also benefit from the steadying in bullion prices.

More interesting is the fact that Silver also seems to have started a rally that could see precious metals outperforming stocks in 2016. Today, Silver was up a full 1% to $17.10 an ounce to mark the highest price since May 2015 when it touched $17.23 an ounce. The most interesting part is that Silver is up almost 10% this month alone as it strives to catch up with the 17% year-to-date gains that gold has delivered.

Investors who find it somewhat expensive to invest in physical bullion might be better served by investing in Silver. ABN Amro analyst Georgette Boele says “the overall momentum in precious metals has clearly improved, and in fact, now Silver is looking to be leading the rest. She went ahead to say, “If you look at the long-term outlook for the gold/silver ratio, it can go a lot lower. That would mean that if you’re optimistic on bullion prices, silver can go a lot higher… We still see gold prices rallying”.

An analyst thinks gold can rise to $3000 an ounce

About three weeks ago, we covered Direxion Shares Exchange Traded Fund Trust in an article talking about how Osama Bin Laden was bullish on the yellow metal with a $3000 an ounce price targets. It turns out that Osama is not the only investor with a wildly optimistic outlook on gold. A precious metal analyst, Dr. Diego Parrilla predicts that gold could rise to $3000 an ounce by the middle of 2019.

Dr. Parrilla hwile speaking at the Dubai Precious Metals Conference noted that gold is on track to rise to spectacular highs. He says, a perfect storm for bullion is brewing” as uncertainty over global central bank policies is deepening. We might have reached the limit of what quantitative easing (QE) programs and negative interest rate policies (NIRP) can accomplish.”

Other analysts seem to share the bullish sentiment on the bullion but to a lesser degree. For instance, analysts at RBC Capital Markets, Credit Suisse, and HSBC have all voiced their bullish support for the yellow metal.

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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.