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What Gold Enthusiasts Could Learn from Big Investors

PART:
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Part 3
What Gold Enthusiasts Could Learn from Big Investors PART 3 OF 5

Are the Volatilities of Mining Stocks High?

Precious metals funds

Precious metals mining stocks are known to closely track the performances of their respective precious metals. The iShares MSCI Global Gold Miners ETF (RING) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) had seen YTD (year-to-date) rises of 20.8% and 31.5%, respectively, as of February 15, 2017.

Notably, mining stocks often show more volatility than precious metals themselves.

Are the Volatilities of Mining Stocks High?

It’s important to monitor the implied volatilities of large mining stocks as well as their RSI (relative strength index) levels, particularly in the wake of a rebound in precious metals prices. Next, let’s focus on Agnico Eagle Mines (AEM), Eldorado Gold (EGO), IAMGOLD (IAG), and Harmony Gold (HMY).

Implied volatility

Call-implied volatility takes into account the changes in an asset’s price due to variations in the price of its call option. During times of global and economic turbulence, volatility is higher than it is in a stagnant economy.

The volatilities of Agnico, Eldorado, IAMGOLD, and Harmony were 41.1%, 53%, 57.8%, and 58%, respectively, on February 15, 2017.

RSI levels

The RSI levels for each of the four above-mentioned mining giants rose due to their rising share prices. Agnico, Eldorado, IAMGOLD, and Harmony had RSI levels of 73, 66.8, 60.9, and 76.9, respectively.

A 14-day RSI level of more than 70 indicates the possibility of a downward reversion in price, whereas a level of below 30 indicates the possibility of an upward reversal.

These four companies have seen trailing-30-day rises of 7.3%, 8.2%, 5.2%, and 15.4%, respectively. These technical numbers could be helpful to investors in the precious metals mining industry. Investors often consider the comparative performances of mining shares.

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