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Rally Intact for Direxion Shares Exchange Traded Fund Trust (NUGT) Even though Gold is Consolidating

Gold NUGT

Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) is having a swell time in today’s session. As at 11:14AM EST, the ETF was up 9.98% to $66.79 and it is not slowing down. There’s no doubt that the bullish rally is still strong in the ETF even though gold is consolidating the gains that it recorded last week.

Barrick Gold

The jobs report is here

Last Friday, gold soared to a 13-month high as it touched $1,276.60 an ounce to mark the highest point since February 2015. Gold for April delivery later settled with 1% gains to close at $1,270.70 an ounce on Friday to mark a 4.1% weekly gain. However, the possibility that gold will find another bullish wave to ride for another weekly rally was reduced by the better-than-expected jobs report that was posted on Friday.

On Friday, the Bureau of Labor Statistics revealed that U.S. employers added 242,000 jobs in February. The impressive jobs data beats the consensus economic estimate of 198,000, the unemployment rate held steady at 4.9%, and December 2015 and January 2016 jobs report was revised upward by an extra 30,000 jobs combined.

The strength of the jobs report was more than enough to water down the bullish prospects of the yellow metal. In a post that I wrote last Wednesday, I noted that “the content of the jobs report will either confirm the improved economic trends or dispel the gains as a fluke”.  Naeem Aslam, chief market analyst at AvaTrade noted the jobs data “will make or break the rally [for gold], but we envisage that the bias remains towards the upside.”

The rally in gold remains intact

Despite the fact that many market watchers have expected the bullion to lose its shine after the impressive jobs data, the yellow metal has been consolidating gains and the Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) is soaring higher.  The fact that the yellow metal is consolidating is seen in the $3.40 decline in the price of gold for April delivery to $1,267.20 an ounce. Reuters report that spot gold was up 0.2% at $1,262.05 this morning.

Analysts have started to weigh in on the prospects of gold in view of the fact that the jobs data suggests that the U.S. economy is improving. HSBC analyst James Steel notes that it won’t be out of place to expect the bullion to drop some gains this week. In his words, “at these high prices restrained physical demand may begin to temper the rally and we could be in for some profit taking or liquidation.”

However,  Lukman Otunuga, analyst at FXTM notes that the yellow metal still has bright prospects because the jobs data only tells part of the story about the U.S. economy. In his words “heavily bullish and although the expectations of further U.S. rate hikes have provided some headwinds for the bulls, the ongoing fears towards the health of the global economy and central banks enforcing negative rates continue to boost the metal’s allure.”

Pay attention to the demand for gold in these countries

If you have invested into the Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT), it might be in your best interest to keep tabs on the countries with the largest gold reserves.  The U.S. leads with an official holding of 8133.5 tons of gold – 72.2% of our foreign reserve is held in the bullion. Germany follows with 3381.0 tons of gold – 66.3% of its foreign reserve is in the bullion.

Italy comes third with 2451.8 tons of bullion – 64.0% of its foreign reserve is in the bullion. France comes fourth has it officially holds with 2435.6 tons of the yellow metal – 60.1 of its foreign reserve is in the bullion. China comes at a distant fifth with 1762.3 tons of bullion – 18% of its foreign reserve is in the bullion. Honorable mentions on the list include Russia, Switzerland, Japan, Netherlands, and India.

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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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