Understanding Mining Stocks amid the Current Precious Metal Slump
Mining stocks react
Precious metals have witnessed sudden and considerable downswings in their prices since mid-April 2017. Consequently, the falls in the prices of gold and precious metals have caused declines in precious metal mining stocks and funds.
Investors are thus concerned about the potential impact of any further interest rate hikes by the US Federal Reserve.
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On a YTD (year-to-date) basis, Sibanye Gold (SBGL), Agnico-Eagle Mines (AEM), Barrick Gold (ABX), and AngloGold Ashanti (AU) have risen 16.6%, 11.4%, 2.6%, and 4%, respectively. The Sprott Gold Miners (SGDM) is trading at a YTD rise of 3.2%.
All four mining companies mentioned above are trading below their short-term 20-day moving averages and their long-term 100-day moving averages—except Agnico-Eagle, which is trading at a premium to both its 100-day and 20-day moving averages.
Remember, a substantial premium on a stock’s price suggests a potential fall in its price, while a discount could indicate a rise in its price. The target prices of these four mining stocks are significantly higher than their current prices, suggesting a positive outlook.
When an RSI (relative strength index) is above 70, it indicates that a stock has been overbought and could fall. An RSI of below 30, however, indicates that a stock has been oversold and could rise. Right now, mining companies’ RSIs appear to be slowly increasing.
SGDM’s RSI is almost 35.6. Such a low RSI level suggests that an increase in the fund’s price could be on the horizon, and RSI levels have already begun to revive this week.