Gold is soaring this month. So are gold miners equities and the related exchange traded funds and the same is true for junior or small-cap miners.
In other words, these are dangerous times to be dancing with inverse leveraged gold miners funds, including those targeting junior miners, but data confirm that is exactly what some traders are doing and they are making those bearish bets with the Direxion Daily Junior Gold Miners Index Bear 3X Shares JDST, -2.52%
JDST attempts to deliver triple the daily inverse returns of the MVIS Global Junior Gold Miners Index (MVGDXJTR). That benchmark features micro-, mid- and small-cap precious metals miners.
Month-to-date, the MVIS Global Junior Gold Miners Index is higher by about 24%, the equivalent of a death knell for JDST. Proving one should not hold leveraged ETFs, bullish or bearish, for more than a few days, JDST is down a staggering 50.90% this month.
JDST’s June struggles are not keeping some traders from doing some bargain hunting.
For the one-, five- and 10-day periods ending Wednesday, June 26, JDST was the second-best asset gatherer among all Direxion leveraged ETFs, according to issuer data. In each of those three time-frames. JDST was second only to its large-cap counterpart, the Direxion Daily Gold Miners Index Bear 3X Shares DUST, -2.32% All DUST has done this month is lose 50%.
For the 10 days ending June 26, traders added $59.3 million to JDST, but they added more than triple that amount to DUST. Additionally, for the five days ending June 26, volume in JDST was nearly double the trailing 20-day average, by far the largest increase among all of Direxion’s leveraged funds.
At the moment, gold prices show no signs of retreating. The primary takeaway for JDST and DUST buyers is that they will likely remain on the wrong side of this trade until the precious metal makes a sustained move below it’s new multi-year high, or they bail out.
However, to steal a phrase from the world of poker, some DUST and JDST may at this point be “pot committed” and forced to hope for the best, although the near-term odds appear stacked against them.