The Hot List: Gold ETFs Burn a Path to Higher Prices
Closing higher for a third day in a row ahead of trading on Wednesday, here are a pair of gold-related exchange-traded funds that may have moved too far, too fast, too soon and may be vulnerable to a short term reversal – as well as potential leveraged gold opportunity for traders more focused on buying than selling (or selling short).
In bear market territory, gold ETFs that represent gold mining stocks have been especially strong in recent days. Up three in a row and finishing higher by more than 2% on Tuesday were shares of both the Market Vectors Junior Gold Miners ETF (GDXJ) and the Market Vectors Gold Miners ETF (GDX).
Both GDX and GDXJ have closed at overbought levels for the past two days in a row. But unlike GDXJ, shares of GDX have managed to rally back above their 200-day moving average on an intraday basis. In fact, any significant strength likely will put GDX above its 200-day on a closing basis, as well.
For traders looking for edges in the buy side and bullion side of the gold market, leveraged exchange-traded funds may be the best way to go. Pulling back toward levels from which it has historically made significant short term gains are shares of the DB Gold Double Short ETN (DZZ). DZZ earned a major, three-point ratings upgrade ahead of trading on Wednesday, dropping by more than 6% on the day to finish at its lowest closing level in a month.
All three exchange-traded funds in today’s report were available from research and data available through PowerRatings. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com