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How the Trump Trade Fear Is Moving Precious Metals

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Part 6
How the Trump Trade Fear Is Moving Precious Metals PART 6 OF 8

A Look at Technical Indicators for Mining Stocks

Mining stocks’ technicals

As investors speculate about the impact of the Trump trade policies on precious metals, there are a few technical indicators to consider when analyzing the performance of mining stocks. While there are many important indicators that analysts can monitor, we’ll focus on the 14-day RSI (relative strength index) scores and implied volatility.

A Look at Technical Indicators for Mining Stocks

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The ETFS Physical Swiss Gold (SGOL) and the ETFS Physical Silver (SIVR) have risen 3.2% and 4.2%, respectively, on a five-day trailing basis. The volatility of mining funds is often higher than that of metal-based funds. Mining shares witnessed a revival in prices as precious metals rebounded. Many miners are converting their 30-day trailing losses to 30-day trailing gains.

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 typically rises.

On May 17, 2017, implied volatilities of First Majestic Silver (AG), Royal Gold (RGLD), Goldcorp (GG), and New Gold (NGD) stood at 51.6%, 26.9%, 28.4%, and 51.6%, respectively. Mining companies’ volatilities are often higher than precious metals’ volatilities.

RSI scores

A 14-day RSI score above 70 suggests that a stock price may fall, whereas a score below 30 suggests that a stock price may rise. The scores for the four miners mentioned above have all risen due to their higher stock prices.

First Majestic Silver, Royal Gold, Goldcorp, and New Gold have RSI scores of 67.1, 80.7, 61.9, 68.9, respectively. These scores have revived along with the companies’ stock prices. 

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