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Direxion Shares Exchange Traded Fund Trust (NUGT) Takes Cue From Gold Ahead of Yellen Speech

Direxion Shares Exchange Traded Fund Trust (NUGT) Gold

Direxion Shares Exchange Traded Fund Trust won’t be seeing much action in today’s session because gold investors are waiting until later in the day before making any major decision about their trades. Gold investors will be waiting to get feelers about what the U.S. Federal Reserve would do about interest rates when it meets next week. Fed chair, Janet Yellen is billed to speak at an event in Philadelphia today and we won’t hear anything more from the Fed until after the June 14-15 monetary policy meeting.

Direxion Shares Exchange Traded Fund Trust (NUGT) Gold

All Eyes On Yellen To Know Fate of Gold

Gold has faced serious headwinds in the last couple of weeks and the yellow metal lost as much 8% in May. The weakness in the yellow metal trickled down to the Direxion Shares Exchange Traded Fund Trust and the ETF lost about 35.3% in May. One of the major reasons behind the weakness in the yellow metal is the hints being dropped by the Fed about its plan to raise interest rates. An increase in interest rates often makes it less-attractive to hold gold and investors often exit the yellow metal for other low-risk income-paying assets.

It was common knowledge last Friday that the May jobs report would have a strong effect on how the yellow metal trades and that the labor data might affect the disposition of the fed towards interest rates. However, the hopes of the proponents of a rate hike was dashed last Friday when the May Jobs data showed unbelievable weakness in the U.S labor market.  It was reported that U.S employers added a seasonally adjusted 38,000 jobs.

The number of jobs added in May underperforms the consensus economists’ estimate of 160,000 jobs. More so, the weak jobs number marked the first time that U.S employers added the lowest number of jobs in almost six years. Quincy Krosby, market strategist at Prudential Financial says, “Not even a magician can take this number and make it sound good.”

The yellow metal found strength last Friday because of the poor jobs report and Gold for August delivery gained 2.5% to $1,242.90 an ounce last Friday. Data from fed-fund futures tracker by CME Group also showed that investors were no longer confident in a June rate-hike. The fed-Fund futures tracker data placed the chances of a rate hike at 3.8% on Friday down from 21% on Thursday.

Gold Holds Steady in The Week

Gold is holding steady today as investors prepare to make a move after Yellen’s speech today. The Direxion Shares Exchange Traded Fund Trust however, is starting the session with gains straight out of the gate. The ETF has made an intraday- high of $100.96 as at 10:21 AM EDT. This morning, spot gold was down 0.3% to $1,240.80 an ounce and gold for August delivery held steady around $1,241.10 an ounce.

Investors would love to know if the Fed would obstinately go ahead to raise interest rates despite the weak jobs data or whether the fed will delay the rate hike. Yellen’s speech today could provide hints on what to expect when the Fed meets next week. INTL FCStone analyst Edward Meir notes that “Although prices could still work a bit higher from here over the course of the month, we think values will be hard pressed to push above the $1,275 range over the course of June,” said INTL FCStone analyst Edward Meir.  “On the downside, another retest of $1,190 cannot be ruled out, especially if the dollar stabilizes on the back of stronger U.S. macro numbers.”

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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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