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Direxion Daily Gold Miners Bull 3X ETF: On The Cusp Of A Big Move Higher

Josh Rudnik profile picture
Josh Rudnik


  • I am buying NUGT as a hedge against my portfolio.
  • Rising inflation is pressuring bonds and stocks lower.
  • NUGT could see price gains amid current market volatility.

With gold prices looking strong amid an uncertain macroeconomic environment, adding long exposure to Direxion Daily Gold Miners Bull 3X ETF (NYSEARCA:NUGT) could be an attractive play going forward. Gold prices have held up well the last few months amid rising interest rates and increasing volatility in equity markets. Inflation pressures could force global central banks to tighten policy quicker than expected in coming months. NUGT's leverage factor and liquidity make it the perfect play to gain long exposure to a potential rise in gold prices over coming months.


Gold prices look strong amid an uncertain financial market environment. Over the last few weeks, rising inflation pressures led interest rates quickly higher, which spooked equity market investors. The constant as this was occurring was gold prices staying within a $1300-$1360 price consolidation.

Gold looks interesting as a potential hedge on both inflation pressures and equity market volatility. It is one of the only asset classes over the last 5-years to not be within striking distance of record high levels. This relative under-performance could signal that a reversal in trend across equities and bonds may lead to inflows into the precious metal.

Source: Trading View

Interest Rates

Since July 2016, the 10-year Treasury yield has roughly doubled. Although interest rates remain at historically low levels, the pace of increase spooked investors in riskier assets. Global monetary tightening, as well as the emergence of inflation pressures could keep support under interest rates going forward, which may cause equity investors to reprice their holdings lower.

With short-dated interest rates now above many stock dividend yields, investors can generate yield on a relatively safer asset class, leading to equity market selling pressure, especially across interest rate sensitive sectors, such as consumer staples and utilities. Rising interest rates are something to watch, especially as inflation pressures potentially increase in coming

This article was written by

Josh Rudnik profile picture
I am currently a portfolio manager at an RIA in Philadelphia with over $1 billion in assets. The portfolio is dedicated towards macro themed positioning with equities, ETFs, fixed income, as well as options and other alternatives. There are opportunities everywhere, both on the long and short side, and I aim to generate absolute returns on an annualized basis for clients. My absolute return portfolio has returned double-digit percentage returns over the last decade regardless of if the market is selling off, or rallying higher with enthusiasm. Relative returns are nice, but at the end of the day, you can't eat relative returns. When the S&P 500 is down 20%, it doesn't necessarily mean you have to be down too. Join my Marketplace service, Absolute Returns, and see how I am positioning my portfolio in real-time, and what trade ideas are coming about daily. I also offer a live chat as part of the service, where questions and ideas can be discussed.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (16)

Josh Rudnik profile picture
What if S&P 500 crashes and gold miners spike, how would you view risk in that scenario and which would be a better holding
Yes, I meant ETFs, not ETNs. I guess you could say that NUGT is diversified since it holds many gold miners. Diversified within the sector. I guess we'll have to agree to disagree on this matter. If SPXL only focused on an index comprised of 500 tech stocks you would therefore consider it diversified too, if I understand your reasoning.
Josh Rudnik profile picture
NUGT is an ETF, and both are diversified
In what way? You've got to be kidding. One's a sector fund and one isn't. One is connected to the price of gold, the other to the ups and downs of 500 diversified, high quality companies. The volatility of these two ETNs responds to completely different influences and thus are not to be traded in the same manner.
agent bitter profile picture
holding nicely today at 25.33
Josh Rudnik profile picture
Apples to oranges in what way, they are both buying a basket of stocks
Hard to compare a leveraged S&P 500 stock fund like SPXL to one that invests solely in gold miners.
like NUGT. Apples to oranges except for the obvious volatility.
Great day trade or very short term, but not truly leveraged to 3x they it is supposed to do. Too many days these leveraged funds are opposite of what the market says they should be. I made good money on plays in 2016 When the price swings were very volatile, but in this consolidation period of gold, not a good play at this time. Just my thoughts.
Josh Rudnik profile picture
3x junior gold bull
Isn’t JNUG the 3X bull ?
If Direxion was forced to adjust the leverage of the 3x ETFs down in response to market volatility, those LEAPS would be destroyed. A much better solution would be to short calls on DUST...
Josh Rudnik profile picture
I also recommend taking small position in the name, not necessarily a large % of the portfolio
Josh Rudnik profile picture
Although I hear what you are saying, if you look at leveraged funds in asset classes that have trended higher, such as SPXL, up 214% since 2016 lows, there is a potential benefit.
it's a timing play and for a trader that keeps his her eye on the mkt daily. not for anyone else. I agree with you 100% now is the time to keep a close eye and either build a position or prepare to. when the trend runs on gold nugt will kill it
Cents and Sensibility profile picture
I think this (and other) leveraged funds should typically be used only for the shorter term due to the general deterioration of value over time rolling over futures and other derivatives. The front page of the Direxion NUGT website states - "the opportunity to take advantage of short term trends", and "Magnify your short-term perspective with daily 3X leverage". I mention this in response to the section in the article on LEAPS whereby readers may think NUGT is acceptable to hold for longer periods. Longer term, these leveraged funds inherently trend downward as evidenced by looking at charts that show a few years history.
PC49 profile picture
06 Mar. 2018
@Mr. Big House...Another lemming response vs. the 3X. I will be buying and HOLDING NUGT if the appropriate time comes. Your theory has no basis in fact. There are time periods you could have bought and held NUGT for MONTHS and gained an appreciable return. How about FAS, that if bought and held from it's low in March '09 until today- a 9 YEAR HOLD, would of netted you into the THOUSANDS of % vs. hundreds of the financials underlying index?
Stating they are very dangerous if not bought and sold at the proper entry points is one thing, but they are NEVER appropriate is another. I challenged another Alpha author and he could NOT debunk my reasoning.
Again, this would be ONLY for EXPERIENCED investors that follow the market daily/weekly on a continuous basis for years, not only on recommendations by newsletters and columns.
Direxion's statement is a disclaimer to avoid lawsuits and steer clear inexperienced traders/investors.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

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