A Brexit Boon For These Leveraged ETFs

Markets Benzinga

Gold has been a predictable beneficiary of the Brexit outcome, which in turn is predictably benefiting already scorching hot gold miners stocks and exchange-traded funds. That includes leveraged fare such as the Direxion Daily Gold Miners Bull 3X Shares (Direxion Shares Exchange Traded Fund Trust (NUGT)) and the Direxion Daily Junior Gold Miners Index Bull 3X Shares (Direxion Shares Exchange Traded Fund Trust (JNUG)).

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Betting On Gold

It has been wrong to bet against gold miners, at least to this point in the year, and calls to do so have been misplaced. JNUG and NUGT continue confirming as much. With Wednesday's gain of 6 percent, NUGT is up more than 60 percent just this month, placing it as the second-best of Direxion's leveraged bullish ETFs on a month-to-date basis.

Related Link: A History Lesson With Gold ETFs

Of course, JNUG is the ETF NUGT trails and with Wednesday's 8 percent gain, the small-cap leveraged gold miners ETF is up 72.5 percent just this month. Since the Brexit outcome became known to global market participants, JNUG and NUGT are up an average of 18 percent.

Further underscoring the strength of gold miners ETFs this year is this anecdote: Of the top 11 non-leveraged ETFs on a year-to-date basis, nine are either gold or silver miners ETFs.

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Global Market Fears, Economic Concerns

Fear in the global financial markets has helped gold shine again. Following the global oil market malaise and stumbling global economy, the Brexit has caused a surge in demand and price for the metal. In turn gold miners stocks, a natural leveraged play on the price of gold, have also experienced a renaissance, said Direxion in a recent note.

Earlier this month, the Federal Reserve opted against boosting interest rates, leaving many market participants feeling that the odds of the central bank raising borrowing costs four times this year, as many thought would be the case heading into 2016, are rapidly dwindling.

Continual Support For Gold

Fewer or no interest rate hikes further solidifies the case for miners because gold, which does not offer a yield, is more attractive in a world of low and negative interest rates.

Data suggest traders are betting on more upside for the miners and are not afraid to do so with NUGT. NUGT's shares outstanding tally has surged nearly 60 percent since the end of last month, according to Direxion data.

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