Direxion Shares Exchange Traded Fund Trust (NYSEARCA:NUGT) shares were down 84.31% to $21.33 but jumped more than 400% in after-hours trading. The company has a market cap of $1.44 billion at 16.64 million shares outstanding. Share prices have been trading in a 52-week range of $17.40 to $437.00.
Direxion Shares Exchange Traded Fund Trust is a gold-backed ETF that seeks daily investment results, before fees and expenses, of either 300% or 300% of the inverse of the performance of the NYSE Arca Gold Miners Index. The NYSE Arca Gold Miners Index is comprised of publicly traded companies that operate globally in both developed and emerging markets, and are involved primarily in the mining for gold and silver.
Commodity prices have been fluctuating largely these days as traders price in expectations for Fed Chairperson Yellen’s testimony in the Jackson Hole Symposium. Many are expecting her to provide a clearer direction for Fed monetary policy adjustments, which would then determine the US dollar’s longer-term price action. Now gold is seen as a hedge to inflation, which would mean that gains in the dollar could weigh on the precious metal’s price.
The reason for these hawkish Fed expectations is the upbeat tone of several policymakers in their recent testimonies. However, there’s still a strong chance that Yellen might be vague with her outlook and remind market watchers that their decisions for the upcoming meetings would be data-dependent. In that case, dollar bulls could unwind some of their positions and thus allow gold and Direxion Shares Exchange Traded Fund Trust to recover.
Lack of confirmation that the Fed can be able to hike interest rates in either September or December can also allow gold to regain traction, especially since risk aversion is still present in the financial markets owing to the Brexit and fears of a slowdown in China.
DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.
