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Why Did Gold and Other Precious Metals Fall on May 18?

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Part 3
Why Did Gold and Other Precious Metals Fall on May 18? PART 3 OF 4

Volatility in Mining Shares Changes According to Market Conditions

Mining stock technicals

Investors are speculating about the impact of “Trump trade” on precious metals. There are a few technical indicators to consider when analyzing mining stocks’ performance. While there are many important indicators that an analyst can monitor, we’ll focus on the 14-day RSI (relative strength index) scores and implied volatility.

Volatility in Mining Shares Changes According to Market Conditions

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The iShares Gold Trust (IAU) and the iShares Silver Trust (SLV) fell 0.83% and 1.8%, respectively, on Thursday due to the slide in gold and silver. Volatility in mining funds is often higher than volatility in metal-based funds. Mining shares witnessed a revival in their price as precious metals rebounded. Many miners are also converting their 30-day trailing loss 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, the implied volatility of First Majestic Silver (AG), New Gold (NGD), Royal Gold (RGLD), and Goldcorp (GG) stood at 54%, 55.5%, 28.9%, and 31.1%, respectively. Mining companies’ volatility is often higher than precious metals’ volatility.

RSI scores

A 14-day RSI score above 70 suggests that a stock price might fall, while a score below 30 suggests that a stock price might rise. The four previously mentioned miners’ scores rose due to their higher stock prices.

First Majestic, New Gold, Royal Gold, and Goldcorp have RSI scores of 58.5, 54.8, 70.8, 48.2, respectively. The RSI scores were revived during the last week along with the companies’ stock prices. On Thursday, metals and mines fell. For ongoing updates on the industry, visit Market Realist’s Metals and Mining page.

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