Bearish Gold Miner ETF Leaps Over 100%

“Gold is trading in a tight range, but it is trading heavy. Fed speakers have pushed back the notion of a 100 bps hike, but gold still hasn’t managed to rally because there are still traders who are using the chance to sell before prices fall further,” TD Securities commodity strategist Daniel Ghali said in a Reuters report.

Russia’s invasion of Ukraine helped to prop up gold prices, but it proved to be only a temporary boost. Since then, inflows into gold-focused exchange traded funds (ETFs) have been dissipating as the dollar continues to gain strength.

“The conflict in Ukraine catalyzed a massive amount of inflows into gold ETFs earlier in the year, but the relevance of that has faded. The hawkish central bank regime is reducing appetite for gold purchases,” Ghali said.

Gold prices climbed as high as 13%, but that didn’t mean the dollar was heading in the opposite direction. It was already staging its own rally before overtaking gold towards the end of April.

^DXY data by YCharts

Weakness in gold prices is translating into a strong few months for the Direxion Daily Gold Miners Index Bear 2X Shares (DUST A-). The fund is up over 100% within that time frame and the expectation of rising interest rates could continue to prop up the dollar while pushing gold prices lower.

DUST seeks daily investment results before fees and expenses of 200% of the inverse of the daily performance of the NYSE Arca Gold Miners Index. The fund invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse or short leveraged exposure to the index equal to at least 80% of the fund’s net assets.

The index is a modified market capitalization-weighted index comprised of publicly traded companies that operate globally in both developed and emerging markets, and are involved primarily in the mining of gold and, to a lesser extent, silver.