GDP Report Helps Gold Extend Rally

Published on Friday, 27 January 2012 18:00 Written by Todd Shriber

New York, January 27^th (TradersHuddle.com) – A softer-than-expected fourth-quarter GDP report helped gold futures extend what has become an impressive rally as Comex gold for February delivery surpassed the $1,730 an ounce mark on strong volume after the Commerce Department reported the U.S. economy grew 2.8% in the fourth quarter. That’s good for the best reading since 2010, but it also lagged the 3% growth rate economists were expecting.

Various media outlets reported Ray Dalio’s Bridgewater Associates, the giant hedge fund, is bullish on gold and those headlines may have sparked some buying in the yellow metal, helping send it to a three-day winning streak. Between the Federal Reserve’s pledge to keep interest rates near zero, the slack Q4 GDP report and Bridgewater’s comments, gold is on pace to post its best monthly gain since August 2011.

Impressive, but checkout silver. While the iShares Gold Trust (NYSE: IAU) is up over 11% year-to-date, the iShares Silver Trust (NYSE: SLV) has basically doubled that performance. SLV climbed another 1.6% today on below average volume to close at $32.96 after encountering round number resistance at $33, the ETF’s intraday high. The Global X Silver Miners ETF (NYSE: SIL) added another 1.9% and what makes this ETF’s string of recent gains all the more noteworthy is the fact that they’ve been happening on above average turnover.

The ETFS Physical Platinum Shares (NYSE: PPLT) added to its recent gains while the ETFS Physical Palladium Shares (NYSE: PALL) absorbed a second consecutive loss.

With physical gold ETFs extending their gains, it was no surprise to see the mining funds get in on the act today. The Market Vectors Gold Miners ETF (NYSE: GDX) was up 2.5% while the Global X Pure Gold Miners ETF (NYSE: GGGG) climbed 3.2%. The Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) was calm by comparison with a gain of 1.7%, but this ETF has been one of the best sector funds of 2012 and is now up almost 21% year-to-date. That throttles the returns delivered by GDX and GGGG.

Risk takers might want to have a look at the Direxion Daily Gold Miners Bull 3X Shares (NYSE: NUGT). This leverage equivalent of GDX is up about 32% year-to-date. As a leveraged fund, NUGT should only be used as a short term trading instrument, but it can pack a punch in just a matter of days. The ETF has an average true range of 1.8, so it can move and move fast. Just be sure to use stop-loss orders with volatile ETFs like this.

For those that think the miners are due for a pullback, NUGT has a bearish cousin in the form of the Direxion Daily Gold Miners Bear 3X Shares (NYSE: DUST). DUST has been getting dusted this year, but if the miners encounter a bumpy day or two in the near-term, DUST is the way to play that.