With no clear direction on where the economy may be heading, gold is thriving amid the uncertainty. That said, the risk/reward ratio is an attractive option for long-term investors as well as short-term traders.
Heading into the first week of April, the metal’s prices were already up above 18% for the year. Tariffs and inflation are contributing a sizable bulk to the market uncertainty, making the precious metal a primary safe haven option.
Benefiting from the white metal’s rise are miners, which tend to make a latent move following the upside of the precious metal. In addition to price appreciation, global investment firm UBS cited other benefits.
“Gold miners offer operational leverage to gold price upside, potential growth and dividend yields,” UBS noted in Investing.com.
The relative strength index (RSI) is a common tool used by traders to gauge the momentum of an asset. In the case of miners, the indication is that tailwinds are blowing in their favor when looking at comparable ETFs like the VanEck Gold Miners ETF (GDX ).
“Near-term momentum in gold miners has been strong,” UBS said. It added that momentum in earnings are “likely to remain positive, aggregate guidance more realistic and valuations close to cyclical lows, we continue to see attractive risk vs reward in the gold miners.”
Short-Term Gold Mining Options
It was mentioned that the miners play can benefit both long- and short-term investors. For the latter looking to capitalize on short-term upside in gold miners, consider a few options from Sprott. These funds offer double the exposure to their respective indexes to add additional profit potential.
One option is the Direxion Daily Gold Miners Bull 2X ETF (NUGT ). It seeks daily investment results that equate to double the performance of the NYSE Arca Gold Miners Index. The index is a modified market-cap-weighted index comprising publicly traded companies that operate globally in developed and emerging markets. They are involved primarily in mining for the precious metal.
Small-cap stocks are always an option for additional upside. They could provide value in the current market, especially if/when the Federal Reserve resumes rate cuts. That said, traders who don’t mind the volatility can consider the Direxion Daily Jr Gold Miners Bull 2X ETF (JNUG ). The fund gives 200% exposure to the daily performance of the MVIS Global Junior Gold Miners Index.
That index tracks the performance of foreign and domestic micro-, small- and midcap companies that generate revenue from mining or similar activities. Whenever markets are trending higher, small-cap companies can make amplified moves to the upside.
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