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Volkswagen Platinum Scare Relieves Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT)

Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) falls
Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) was flat on Wednesday morning as the price of platinum fell. Though the prices of the precious metals are often in lockstep with each other, the platinum move had little to do with how Wall Street sees Fed rates or GDP growth.
The metal gets substantial demand from its use in diesel engines, and Volkswagen AG  may be ruining the market.
Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) falls
On this morning’s market platinum, which has been hit with blows close to those seen by gold in recent months, fell to lows not seen in six and a half years on the London market. The metal is used in diesel engines, and the market appears to be betting that the crisis caused by Volkswagen’s lies will drive demand for cars that run on the fuel lower.

Volkswagen causes platinum chaos

On Wednesday Volswagen said that its CEO Martin Winterkorn would leave the firm. It emerged earlier this week that Volswagen had cheated on emissions tests designed by the EPA. The firm installed special software that made it change its emissions profile while being tested. While on the road, however, the emissions were above levels mandated by law.

The fact that the engines Volkswagen cheated on are diesel may not be very important, but the platinum market is feeling the pain this morning.

David Govett, who is in charge of precious metals at Marex Spectron told the Wall Street Journal on Wednesday that it might cause a shift away from diesel. “People are going to start saying ‘Actually, we shouldn’t have diesel cars, let’s head toward petrol or electric’,” he said.

Car building accounts for about 30 percent of all platinum demand in the world. The metal is used in order to make diesel more environmentally friendly and comply with emissions standards. Its use also makes the engines much more expensive.

Simona Gambarini of Capital Economics said this morning that “It’s likely that diesel cars will be a lot more expensive because they require a lot more PGMs [platinum derived material] and sophisticated technology to make them comply with the new regulation and that could be the real game-changer.”

Volkswagen leaves Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) untouched

 The massive fall in platinum hasn’t, for the time being at least, hit the Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) or the gold market one way or another. If the price of the metal falls, some gold traders may seek to invest in the metal and sell out of their gold holdings.
If, however, it becomes clear that the entire diesel market has been hit by the Volkswagen scandal, the Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) may be in for a boost as traders abandon platinum as a store of value.
On this morning’s market shares in the Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) were trading flat.
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