Silver: precious or industrial?
The current turmoil in the stock markets has hurt most market participants. Investors are thus opting for safer investments like gold and silver. There has also been increased investment in the Treasuries since the global rout began. Silver has been the second best precious metal and has gained about 2.1% since the first trading day of January. The current unrest has also brought down most commodities that have extensive industrial usage like platinum and copper. Silver is ranked as the fourth best commodity among the 24 commodities listed on the S&P GSCI (Goldman Sachs Commodity Index). During such turbulent times, silver tilts towards its precious metal side rather than the industrial metal side.
Below is a chart that shows the technicals of silver-based mining companies, which make up 8.3% of the VanEck Vectors Gold Miners ETF (GDX).
Most of the mining companies are still trading in the red despite a rise in gold and silver. The four silver mining companies discussed here are Silver Wheaton (SLW), Pan American Silver (PAAS), Coeur Mining (CDE), and Hecla Mining (HL). All these four companies have relative strength indicators close to 30, which signifies undervaluation and a possible pullback in prices. The current trading prices are also significantly below their 100-day moving average prices, which further points towards possible undervaluation.
The target price ranges for SLW and CDE are almost double the current price levels, whereas PAAS and HL are currently at a 22.9% and 30.9% discount from their 100-day moving average price. The GDX ETF is also trading at a 9.1% discount from its 100-day moving average price $14.2.