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Gold at 8-Week Low: What's Next?

PART:
1 2 3 4 5 6
Part 5
Gold at 8-Week Low: What's Next? PART 5 OF 6

Movement of the RSI and Volatility for Mining Stocks

Falling mining stocks

The Federal Reserve’s most recent rate hike was negative for precious metals as well as mining stocks. Most mining stocks have been tumbling in the weeks following the rate hike.

In this part of our series, we’ll examine the performances of AngloGold Ashanti (AU), Eldorado Gold (EGO), and Harmony Gold (HMY). These three stocks have fallen 15.1%, 15.2%, and 16.6%, respectively, over the past 30 trading days. Iamgold (IAG) has maintained a trailing 30-day rise of 10.9%.

Movement of the RSI and Volatility for Mining Stocks

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Volatility measurement

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, AngloGold Ashanti, Eldorado Gold, Iamgold, and Harmony Gold had implied volatilities of 43.3%, 55.2%, 48.7%, and 59.2%, respectively.

Notably, the volatility of mining stocks is often higher than that of precious metals.

Falling RSI levels

The 14-day RSI (relative strength index) shows whether an asset is oversold or overbought. An RSI score above 70 suggests a price slump, while anything below 30 suggests a price gain. Lately, RSIs have been falling for most mining companies as their prices decline.

AU, EGO, IAG, and HMY have RSI scores of 19.8, 37.0, 35.9, and 25.0, respectively, as of July 3, 2017. Precious metal–based funds such as the iShares Gold Trust (IAU) and the iShares Silver Trust (SLV) have fallen 1.9% and 2.4%, respectively, in the past five trading days as of July 3, 2017.

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