President Donald Trump’s victory in the 2016 US election initially resulted in fear among precious metals investors. The uncertainty in the market boosted precious metals as well precious metals mining companies. The Federal Reserve’s rate hike in December 2016 pressured precious metals, which joined mining companies in a downward trend.
Precious metals mining stocks typically follow precious metals, moving in the same direction. Some investors expected choppy waters for miners after Trump’s victory, but that didn’t happen.
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On a YTD (year-to-date) basis, First Majestic Silver (AG), B2Gold (BTG), Royal Gold (RGLD), and Goldcorp (GG) have seen reasonable rises in their stock prices. They’ve risen 31.3%, 42.6%, 12.3%, and 22.5%, respectively. The Sprott Gold Miners ETF (SGDM) has also seen a YTD rise of 19.5%.
The above four mining companies are trading above their shorter-term, 20-day moving averages and their 100-day moving averages.
A substantial premium on a stock’s trading price suggests a potential fall in its price. A discount could indicate a rise in its price. The target prices for the above-mentioned four mining companies are significantly higher than their current prices, suggesting a positive outlook.
An RSI (relative strength index) level of above 70 indicates that a stock has been overbought and could fall, while an RSI level of below 30 indicates that a stock has been oversold and could rise. Mining companies’ RSI readings have been slowly rising.
On February 15, 2017, SGDM’s RSI level was close to 68. A future interest rate hike could negatively impact metals as well as precious metals mining companies.