Gold ETFs: Aggressive Traders Only

08/05/2015 9:00 am EST

Focus: FUNDS

Doug Fabian

Editor, Successful ETF Investing, ETF Trader's Edge, Weekly ETF Report, and ETFU.com

Everyone loves to hate gold and gold mining stocks right now. In fact, it’s become a favorite pastime of financial pundits, bloggers, and investment advisors to tell everyone to steer clear of anything related to the yellow metal, observes Doug Fabian, of Successful ETF Investing.

On the surface, this makes sense. The Fed is likely to raise interest rates later this year and that will likely help buttress the value of the US dollar. Moreover, because gold is denominated in dollars, gold prices are likely to fall on dollar strength.

While all of this could be true in the long-term, over the short-term, gold and gold mining stocks have been oversold way too far, way too fast.

Right now, there’s blood in the golden streets, with gold and gold mining stocks trading near record lows. It is largely because there’s such an ugly bloodletting here in the sector that I think this market is way overdue for a huge, tradable bounce during the next several weeks.

That’s why today I am recommending two new trading buys for aggressive investors only. I am now recommending two leveraged gold exchange-traded funds.

With Direxion Daily Gold Miners Bull 3X ETF (NUGT), you get a leveraged fund designed to deliver 3X the daily price moves of the NYSE Arca Gold Miners Index.

With Global X Gold Explorers ETF (GLDX) there is no leverage, but you are getting exposed to the price moves in the generally more volatile Solactive Global Gold Explorers Total Return Index.

These two funds give us leveraged and non-leveraged exposure to most of the global gold mining segment, a segment where the blood in the streets has been flowing and waiting to be sniffed out and pounced on by aggressive traders.

To protect yourself on the downside in this very volatile sector, I want you to place the following stop-loss orders: use a stop of $3 with Direxion Daily Gold Miners Bull 3X ETF NUGT and a stop of $7 with Global X Gold Explorers.

These stops are very wide, but given the volatile nature of this sector, you need to let these funds fluctuate more than other market sectors.

Remember that these are Aggressive Portfolio buys only and designed for investment only if you have money to put to work in a short-term trading account.

Also, remember to keep your overall allocations to either of these respective funds very low, as they are not intended to be staples in your investment portfolio.

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