Are There Any Gold Bugs Left?

Gold is down only 8% this year, but it’s off almost 13% from its high. For some reason, it has lost its allure as a hedge to inflation and global turmoil.

By Direxion

Sept. 12 2018, Published 9:37 a.m. ET

Gold is down only 8% this year, but it’s off almost 13% from its high. For some reason, it has lost its allure as a hedge to inflation and global turmoil. The main culprit may just be the US dollar, which is only back to where it was in mid-2017. It’s tough to say why gold lost its glitter as a hedge—maybe investors are looking at other alternatives like bitcoin as a store of value in uncertain times.

And keep in mind, other than the United States (at number 3), the top three consumers of gold are India, China, and Saudi Arabia. And we know that two out of those three are having a tough few months.

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We can’t be certain of gold’s place any more—or maybe this is just an anomaly—but either way, Direxion has the ETF for you. NUGT (Direxion Daily Gold Miners Index Bull 3X Shares ETF) and DUST (Direxion Daily Gold Miners Index Bear 3X Shares ETF) are interesting after these drastic moves, depending on whether you are value- or momentum-driven. Look at the massive 50%+ divergence since July 1.

Biotech is never defensive
Usually, when investors add biotechnology stocks to their portfolios, they feel confident about risk. Often this risk-on mentality pushes risky names up. So, the opposite is also true. When they want to reduce risk, biotech names are the first to go. Other times, biotech sells off because a major type of therapy or cure fails. That doesn’t seem to be the case here. This sell-off in biotech just feels like a good, old-fashioned raise-some-cash type of sell-off.

November and December are historically great months for biotech. So, keep these on your radar. LABU (Direxion’s Daily S&P Biotech Bull 3X Shares ETF) and LABD (their Daily S&P Biotech Bear 3X Shares ETF) can help you stay risk-on or risk-off. Note how biotech was outperforming the market until recently—by a wide margin.

Conclusion: Avoiding FAANG means adding risk, but some sectors may pay off
We really do have four badly performing sectors of stocks here. And they have all really hit big problems in the last month or so. Often, this means good opportunities to either reverse the trend or keep plunging. Whichever you believe is most likely to happen this fall, Direxion has a leveraged product for you. You can really supercharge your returns if get the timing and, of course, direction right.

Related Leveraged ETFs:

Performance as of 6/30/2018

* The Net Expense Ratio includes management fees, other operating expenses and Acquired Fund Fees and Expenses. If Acquired Fund Fees and Expenses were excluded, the Net Expense Ratio would be 0.90% for NUGT and 0.95% for each other Fund. The Funds’ adviser, Rafferty Asset Management, LLC (“Rafferty”) has entered into an Operating Expense Limitation Agreement with each Fund. Under the Operating Expense Limitation Agreement, Rafferty has contractually agreed to waive all or a portion of its management fee and/or reimburse each Fund for Other Expenses through September 1, 2019, to the extent that the Fund’s Total Annual Fund Operating Expenses exceed 0.95% of each Fund’s average daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses). If these expenses were included, the expense ratio would be higher.

Past performance does not guarantee future results.