Canadian market buoyed
With the rise of the precious metals, mining funds and mining stocks have risen considerably. The iShares Gold Trust (IAU) and the Global X Silver Miners ETF (SIL) have risen by 24.5% and 155%, respectively, on a YTD (year-to-date) basis.
The shares of large Canadian miners such as Silver Wheaton (SLW), Barrick Gold (ABX), and Goldcorp (GG) have risen a whopping 107.8%, 177.1%, and 58.3%, respectively, on a YTD basis. The rise of these Candian miners sent a wave of hope to the Canadian stock market. The mining and energy stocks have propelled Canada to be the second-best-performing developed economy after New Zealand.
The graph above shows the performances of giant Canadian miners Barrick Gold and Goldcorp.
Volatility of the miners
As these three Canadian miners have been vulnerable to the changes in the precious metals, the call implied volatility for these miners is high. The call implied volatility measures the changes in the price of a call option with respect to the variations in the price of an asset. Goldcorp, Silver Wheaton, and Barrick Gold have call implied volatilities of 45.3%, 45.8%, and 49.2%, respectively.
These miners are also trading at a considerable premium to their 100-day moving averages. Significant premiums over the longer-term average may suggest a pullback in price.
It’s clear that the Canadian markets are closely linking their performance to that of the mining and energy stocks. Therefore, to gain insight into the overall markets in Canada, it’s crucial to study the miners, and to understand miners, investors often need to follow the precious metal markets.