Bullish Leveraged Gold Miners ETFs Are On Fire

Gold prices are trading modestly lower Monday with the SPDR Gold Shares (NYSE:GLD), the world's largest exchange traded fund backed by physical holdings of bullion, down a quarter of a percent as traders wager whether the Federal Reserve will soon raise interest rates.

Widely consider to be a positive for the dollar, higher interest rates are viewed as the opposite for gold because the yellow metal, like other commodities, is priced in dollars meaning it is vulnerable to a stronger greenback. That much has proven over the past two years, but gold's sensitivity to speculation on the Fed's next move is not stopping miners ETFs, including leveraged funds, from following through today on last Friday's impressive showings.

After surging more than 8 percent last Friday, the Market Vectors Gold Miners ETF (NYSE:GDX) was higher by nearly 4 percent at time of writing. Several other precious metals miners ETFs rank among Monday's top percentage gainers among non-leveraged ETFs and that is excellent news for leveraged mining funds.

Run With The Gold

With GDX, the largest gold miners ETF, higher by almost 4 percent, the Direxion Daily Gold Miners Bull 3X Shares (NYSE:NUGT) is flirting with a Monday gain of nearly 12 percent and doing so on volume that could top the trailing 90-day average. Nearly 3.6 million shares have already changed hands in NUGT as of this writing and the ETF's average volume over the past three months is just over 5.1 million shares.

As GDX was able to do last week, NUGT now resides above its 20- and 50-day moving averages though like its non-leveraged counterpart, NUGT has plenty of work to do to reclaim its 200-day line. NUGT resides more than 61 percent below that critical moving average.

Dust Up

Adding to the intrigue surrounding NUGT is that last Friday's pop did little to generate confidence among traders. Actually, data suggest traders saw NUGT's surge on that day as an opportunity to take profits and cozy up to its bearish equivalent, the Direxion Daily Gold Miners Bear 3X Shares (NYSE:DUST).

Traders pulled $48.4 million from NUGT last Friday, the worst outflows tally for any of Direxion's triple-leveraged ETFs, according to issuer data. Conversely, DUST saw the best one-day inflows among Direxion leveraged ETFs with new assets arriving to the tune of $30.1 million.

This is an important tell regarding DUST and NUGT because a rather easy trade has been to buy the member of this pair that everyone else is selling because, more often than not, the member of this pair riddled by outflowsis the one seeing positive price action while the gaining assets is plunging. Consider this: NUGT has lost two-thirds of its value this year but has hauled in almost $730 million in new assets. On the other hand, DUST has lost about 27 percent year-to-date, with the bulk of those losses coming in recent weeks, but the ETF has seen outflows of roughly $126 million.

Another important point to remember is that one needs to know what one is getting involved with DUST and NUGT. That means volatility. Over the past 30 days, only two of Direxion's leveraged bullish ETFs have been more volatile than NUGT and only two of the firm's bearish leveraged funds have been more volatile than DUST, according to issuer data.