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Gold Not so Solid: Gauging the Impact of the Latest News

PART:
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Part 3
Gold Not so Solid: Gauging the Impact of the Latest News PART 3 OF 5

The Retaliation of Mining Stocks

Mining stocks and metals

The precious metal market had experienced a slump in the days leading up to the Fed’s decision to hike the interest rate on March 15. Then on Monday, March 13, precious metals and mining stocks both saw sudden revivals.

Donald Trump’s victory in the November 2016 elections initially worried precious metal investors, as well. But uncertainty in markets since the election has boosted precious metals and precious metal mining companies. Remember, precious metal mining stocks typically move in the same direction as precious metals.

The Retaliation of Mining Stocks

The Retaliation of Mining Stocks

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Before the Fed’s latest hike, on March 13, Randgold Resources (GOLD) Kinross Gold (KGC), and Alacer Gol (ASR) had seen upswings of 11.7%, 4.5%, and 15.2%, respectively, on a YTD (year-to-date) basis. Eldorado Gold (EGO) had seen a YTD loss of 7.5%, while the Global X Silver Miners (SIL) had seen a YTD rise of 6.3%.

Technical indicators

The four mining stocks mentioned above are trading below their shorter-term 20-day moving average. Notably, a substantial premium on a stock’s trading price suggests a potential fall in price, while a discount could indicate a rise in price. Alacer and Randgold are also at a premium to their 100-day moving average.

The target prices of our four mining companies are significantly higher than their current prices, suggesting a positive outlook.

Low RSI levels

When it comes to RSI (relative strength index), any level above 70 indicates that a stock has been overbought and could fall, whereas an RSI level below 30 indicates that a stock has been oversold and could rise. Mining companies’ RSI levels are slowly rising.

Specifically, the RSI level for the Global X Silvers Miners fund is ~31.2, suggesting that it could see an upward price correction soon. Any future interest rate hikes could also negatively impact precious metals and precious metal miners.

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