Where Is Precious Metal Mining Volatility Headed Now?
Falling mining stocks
The recent rate hike by the US Federal Reserve was negative for precious metals as well as for mining stocks. Most miners have been tumbling for the past couple of weeks, following the Fed’s latest decision.
In this part of our series, we’ll examine the performances of First Majestic Silver (AG), Royal Gold (RGLD), and Goldcorp (GG). These three stocks have slumped 6.5%, 4.8%, and 5.5%, respectively, over the past 30 trading days. Alamos Gold (AGI) has maintained a 30-day-trailing gain of 6.8%.
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Implied volatility measures the price variations of an asset with respect to the changes in the price of its call option. On June 29, 2017, Alamos, First Majestic, Royal Gold, and Goldcorp had implied volatilities of 51.4%, 51.4%, 26.2%, and 31.6%, respectively.
Notably, the volatility of mining stocks is often higher than that of the precious metals themselves.
Falling RSI levels
The 14-day RSI (relative strength index) depicts whether an asset is oversold or overbought. An RSI score above 70 suggests a price slump, while anything below 30 suggests a price gain. Of late, RSIs have been dropping for most mining companies as their prices decline.
AGI, AG, GLD, and GG have RSI scores of 46.4, 46.6, 46.3, and 40.6, respectively, as of June 29. Notably, the iShares Gold Trust (IAU) and iShares Silver Trust (SLV) have fallen 2% and 4%, respectively, in the past five trading days.