Direxion introduces bullish and bearish triple-leveraged gold ETFs

By: Anton Aleksandrov
Anton Aleksandrov
Anton is a freshly graduated economist from the States with passion for the world of finance. He is one… read more.
on Apr 11, 2014
Updated: Oct 21, 2019

iNVEZZ.com Friday, April 11: Direxion, a leveraged index mutual fund provider, launched yesterday a triple-exposure futures-based gold exchange traded fund. The Direxion Daily Gold Bull 3X Shares (NYSEArca:GLDL) and the Direxion Daily Gold Bear 3X Shares (NYSEArca:GLDS) are the first ETFs to offer triple-leveraged long and short exposure to Comex Gold Futures.

“Direxion’s leveraged ETFs are aggressive, athletic trading tools designed to provide sophisticated traders with vehicles to take advantage of market opportunities in either direction. By providing exposure to select markets on the long and short side, we help traders respond to short-term price movement as part of their overall active investment strategies,” said Dan O’Neill, chief executive of Direxion.

The ETFs are launching at a time when gold has rallied following a sell-off last year. The precious metal, already supported by mounting tensions in Ukraine, received a further boost on Wednesday when the US Federal Reserve’s March meeting minutes showed policymakers were not keen on lifting interest rates straight after the end of the bond purchasing programme. However, the price of gold remains at risk of losing momentum due to outflows from gold funds and weak physical demand in Asia, some traders have opined.

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Commerzbank analysts yesterday said in a research note that the Fed’s less hawkish tone helped precious metals, but there was uncertainty about when interest rates might actually start to rise. “Gold has thus gained for the third consecutive day, doubtless at least in part because of concerns about the situation in Ukraine. Reflecting the performance of the gold price, the selling pressure on gold ETFs also abated – for the first time since the end of March, they no longer showed any net outflows yesterday,” the analysts wrote.

Investors withdrew $946 million (₤564 million) from gold ETFs in January but they returned to ETFs like the SPDR Gold Shares (NYSEArca:GLD) and the ETFS Physical Swiss Gold Shares (NYSEArca:SGOL) in February and March, adding a combined $858 million (₤511 million) to gold funds during those two months.
The precious metal is often considered a safe haven in times of political and economic turmoil. However, many investors believe that the slide in gold prices that started last year will continue and gold is due a severe correction similar to that in the period from 1988 to 1999. Direxion argues that the precious metal has bottomed and it’s time to buy low.

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