Back to falling prices
Precious metals saw an up day on Thursday, November 19, 2015, after the bloodbath in prices. The rise was likely due to the indication that the Federal Reserve would have a staggered, slow approach to raising interest rates.
But precious metals fell again on Friday, November 20. Gold fell 0.17% and settled at $1,076.30 per ounce. Silver closed 0.89% lower than the previous close. Platinum fell 0.26%. Palladium was the only precious metal that rose, rising 3.3% and closing at $558 per ounce.
As metals have been plunging, so have ETFs such as the Direxion Daily Gold Miners ETF (NUGT) and the VanEck Vectors Gold Miners ETF (GDX). The two indexes fell 11.2% and 4.1%, respectively, on Friday, November 20, 2015.
Relative Strength Indicator
One important aspect of precious metals is the RSI (Relative Strength Indicator). The RSI compares the magnitude of recent gains to recent losses in an attempt to determine the overbought and oversold conditions of an asset. As RSI approaches the 70 level, it means the asset may be getting overvalued and is a good candidate for a fall in price. Likewise, if the RSI approaches 30, it’s an indication that the asset may be getting oversold and therefore likely to become undervalued.
The 14-day RSI figures for gold, silver, platinum, and palladium are all currently close to 30. This probably indicates that there may be some level of undervaluation in these assets and that a pullback may be just around the corner. The most important driving factor of bullion prices is the Fed’s decision concerning a hike in the interest rate, a looming fear among investors.
Mining equities such as B2Gold (BTG), Royal Gold (RGLD), and Sibanye Gold (SBGL) have witnessed falling prices on a five-day trailing basis. These three stocks make up 8.4% of the VanEck Vectors Gold Miners ETF (GDX).