Leveraged Gold Miners ETF Battleground

| May 6, 2015 | 0 Comments

gold minersThe battle between the bears and bulls over gold miners stocks is heating up.  Aggressive traders can use a leveraged gold miners ETF to pick a side and profit.

The Market Vectors Gold Miners ETF $GDX has been in a bearish downtrend for three years.  Shockingly, GDX has lost 70% of its value since 2011.

But gold miners stocks are up 13% over the last six months and they’re up 11% so far this year.

Gold Miners In A Long-Term Bear Market

Now the bulls and bears are making their case for what the future will bring to gold miners ETFs. 

Here’s what the bulls are saying about leveraged gold miners ETFs…

There’s no doubt that investing in gold miners’ stocks has been painful over the last few years.  But there are some important indicators of bullish reversal taking place.

First off, take a look at the price action of GDX over the last six months.  Since it tested support of the 2008 low, GDX hasn’t made two higher lows.

In short, this is the type of price action we see when selling has been exhausted.  There’s simply nobody left that’s willing to sell at these prices.

What’s more, there are some important bullish fundamentals for gold prices.

Demand for gold in China and India has doubled in the last year.  These countries buy nearly half of all consumer related gold.

These demand trends are certainly bullish for gold prices.  And that’s good news for gold miners that need gold above $1000 per ounce to breakeven on production costs.

And don’t forget that gold miners are producing more gold than ever before.

Gold mining production increased 2% to 3,114 tons in 2014.  And production has continued to ramp up in 2015.

The combination of a bullish price reversal and bullish demand fundamentals for gold should send gold mining stocks higher in the weeks ahead.

Here’s what the bears are saying about leveraged gold miners ETFs…

Gold miners have had a nice run to start 2015.  But the recent uptick isn’t going to last.

Right now gold is a hated asset class.

Investors that own gold ETFs can’t sell them fast enough.  Every rally in gold prices triggers more gold ETF selling as investors that are trapped in these ETFs cut their losses.

In fact, investors have pulled a massive $22 billion out of the largest gold ETF over the last three years.

There’s little chance of gold prices moving higher as long as investors are selling into every uptick.  And without higher gold prices, gold miners stocks aren’t moving higher either.

What’s more, the bullish price action for GDX is only short term. The dominant long term trend is down.  The downward trending green line on the chart above is a hammer just waiting to drop on gold miners stocks.

The relief rally in gold and gold miners is a trap for bulls.  And a great setup for bears to initiate new bearish positions on gold miners stocks before they move lower again.

Leveraged gold miners ETFs to pick a side and profit…

If you think the bulls are right, take a look at buying the Direxion Daily Gold Miners Index Bull 3x Shares $NUGT.  This ETF seeks daily investment results that are triple (300%) the daily performance of the NYSE Arca Gold Miners Index.

If you think the bears are right, take a look at buying the Direxion Daily Gold Miners Index Bear 3x Shares $DUST.  This ETF seeks daily investment results that are triple (300%) the inverse (opposite) of the daily performance of the NYSE Arca Gold Miners Index.

Still not sure which gold ETF is right for you?

Good Investing,

Corey Williams

Note: Corey Williams writes and edits ETFTradingResearch.com.  Sign up for our free ETF reports and free e-letter at http://www.etftradingresearch.com/free-sign-up.  We’re devoted to helping you make more money from ETFs.

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Category: Leveraged ETFs

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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