Gold prices have veered lower in recent weeks as riskier assets have come back into style, but the case for bullion, one of 2019's best-performing commodities, remains strong heading into next year and that could provide an opportunity with the miners.
The Direxion Daily Gold Miners Index Bull 3X Shares (NYSE: NUGT) has, by its standards, recently traded in a tight range, but with bullishness prevailing in the mining sector, NUGT could be poised to snap out of its current funk.
NUGT, one of the largest and most heavily traded leveraged exchange-traded funds, looks to deliver triple the daily returns of the NYSE Arca Gold Miners Index.
Why It's Important
As a leveraged ETF, and a volatile one at that, NUGT is a short-term trade, not a long-term investment. However, the fund is poised to take advantage of a longer-ranging theme pertaining to mining equities.
“The stocks of global gold mining companies are generally trading lower than analysts' mean target prices, implying a median upside potential to investors of 25.9% across the sector,” according to S&P Global Market Intelligence.
In other words, if sell-side analysts start boosting price targets of stocks in the NYSE Arca Gold Miners Index, those names could move higher, potentially fanning the flames of a rally in NUGT.
There's good news for NUGT's small-cap counterpart, the Direxion Daily Junior Gold Miners Index Bull 3X Shares (NYSE: JNUG). JNUG looks to deliver triple the daily returns of MVIS Global Junior Gold Miners Index.
The good news comes in the form of analyst price targets on small-cap miners needing to be revised higher.
“The gold companies with the greatest implied percentage of upside to analysts' price targets are generally companies with total market capitalization under US$1.0 billion, according to an analysis of data compiled Dec. 6,” notes S&P Global Market Intelligence. “OceanaGold Corp. was the only top-10 global gold producer by percentage of potential upside to its stock price with a market capitalization greater than US$1.0 billion.”