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Gold Breaches $1,400: What’s the Next Stop?

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Gold’s performance

Gold is now trading close to a six-year high following the Fed’s dovish pivot at its June policy meeting. After being range-bound for the last five years, gold has finally broken out and its outlook is bullish.

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Factors supporting gold

The SPDR Gold Shares ETF (GLD) has gained 9.7% in the last month, significantly outperforming broader markets. The S&P 500 (SPY), Dow Jones Industrial Average (DIA), and NASDAQ Composite (QQQ) have gained 2.6%, 3.2%, and 3.7%, respectively. The Fed pivoted after US-China trade war tensions escalated with Donald Trump’s tweet in May, supporting gold. Other factors supporting gold include the US dollar (UUP) weakening on prospects of Fed rate cuts, geopolitical tensions, and weaker economic numbers.

Gold and gold ETFs

Gold miners’ prices have changed even more than gold’s. However, this is not surprising given that miners are usually leveraged bets on gold, amplifying its performance. For example, The VanEck Vectors Gold Miners ETF (GDX) has gained 21.7% in the last month, while GLD has gained 9.7%. Investors in even more leveraged funds such as the Direxion Daily Gold Miners Index Bull 3X Shares ETF (NUGT) and the Direxion Daily Junior Gold Miners Index Bull 3X Shares ETF (JNUG) have made a killing. This month, they have returned a whopping 75.3% and 68.3%, respectively. To learn more, read A Perfect Storm for Gold: All Macro Drivers Align.

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