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Here Are the Scenarios That Decide Movements in Precious Metals

PART:
1 2 3 4 5
Part 5
Here Are the Scenarios That Decide Movements in Precious Metals PART 5 OF 5

Miners and their Volatility Numbers and RSI Levels

Precious metal funds

Precious metal mining stocks are known to closely track the performances of precious metals. Precious metal leveraged funds such as the Proshares Ultra Silver (AGQ) and the Direxion Daily Gold Miners Bull 3X ETF (NUGT) have fallen due to the recent slump in precious metals. Mining stocks are often known to be more volatile than the precious metals they mine.

It’s important to monitor the implied volatilities of large mining stocks. You should also watch their RSI (relative strength index) levels, particularly in the wake of changing precious metal prices.

As you can see in the chart below, the RSI levels for mining stocks have fallen drastically. In this final part of the series, we’ll look at Silver Wheaton (SLW), Franco-Nevada (FNV), Yamana Gold (AUY), and Pan American Silver (PAAS).

Miners and their Volatility Numbers and RSI Levels

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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 in a stagnant economy.

As of March 7, 2017, the volatilities of Silver Wheaton, Franco-Nevada, Yamana Gold, and Pan American Silver were 35.5%, 37.1%, 33.3%, and 48.9%, respectively. The volatilities of mining companies are often higher than the volatilities of precious metals.

Low RSI levels

A 14-day RSI above 70 indicates the possibility of a downward movement in a stock’s price. A level below 30 shows the possibility of an upward movement in price. The RSI levels of the four mining giants mentioned above have fallen drastically due to their falling stock prices.

Silver Wheaton, Franco-Nevada, Yamana Gold, and Pan American Silver have RSI levels of 19.5, 14.1, 23.1, and 15.2, respectively. These dangerously low RSI levels indicate a possible rebound in price soon.

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