Comparing Mining Stocks’ Volatility
Most precious metal miners’ prices have risen over the past few weeks. Rises and falls in precious metals are often reflected in mining stocks since precious metals are their core products. In this part of the series, we’ll look at some important technical indicators, including volatility figures and RSI (relative strength index) scores, for major mining stocks Agnico Eagle Mines (AEM), Randgold Resources (GOLD), Coeur Mining (CDE), and Goldcorp (GG).
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Call-implied volatility is a measurement of the variation in an asset’s price with respect to the variation in the price of its call option. As of September 7, 2017, the call-implied volatility for Agnico, Randgold, Coeur Mining, and Goldcorp was 30.2%, 25.5%, 44.5%, and 28.3%, respectively. It is important to understand that the volatility of mining stocks is usually greater than the volatility of the precious metals they mine.
An RSI score indicates whether a stock has been overbought or oversold. If a stock’s RSI score is above 70, it may be overbought, and its price may fall. If a stock’s RSI score is below 30, it could be oversold and may correct upward.
The aforementioned miners’ RSI scores have recovered. Agnico, Randgold, Coeur Mining, and Goldcorp have RSI scores of 75.6, 88.4, 84.4, and 68.4, respectively. There’s been a significant rebound in the prices of precious metals. Most of the miners have trailing-30-day gains. Only Hecla Mining has a trailing-30-day loss.
Mining-based funds such as the SPDR S&P Metals and Mining ETF (XME) and the Sprott Junior Gold Miners ETF (SGDM) are also affected by changes in precious metal prices. The funds have risen 2.1% and 5.1%, respectively, year-to-date.