Miners followed gold
Like precious metals, mining shares have also been slowly declining. On average, miners follow gold’s price direction almost 50% of the time. Most mining companies reversed their 2015 losses during the first few months of 2016 and posted substantial gains.
The correlation between mining stocks and precious metals remains high. On Friday, August 12, 2016, precious metals and precious metals–based equities both declined.
Mining shares had a mixed reaction on Friday, despite the fall in precious metals. Alamos Gold (AGI) rose 0.56%. But First Majestic Silver (AG), B2Gold (BTG), and Royal Gold (RGLD) fell 1.3%, 0.88%, and 1.6%, respectively.
However, these four stocks also have tremendous YTD (year-to-date) gains. They’ve risen 173.6%, 453.5%, 239.2%, and 128.3%, respectively YTD. Safe-haven bids were the most important factors behind the increases in gold and gold mining companies.
The VanEck Vectors Junior Gold Miners ETF (GDXJ) has a YTD gain of 165.9%.
Alamos Gold, First Majestic Silver, B2Gold, and Royal Gold are trading at massive premiums of 20.5%, 49.8%, 49.7%, and 27%, respectively, to their 100-day moving averages. A huge premium over a trading price suggests a possible fall in price.
The RSI (relative strength index) levels for miners and precious metals are falling. An RSI level above 70 indicates that a stock has been overbought and could fall. An RSI level below 30 indicates that a stock has been oversold and could rise. GDXJ’s RSI is close to 60.
Alamos Gold, First Majestic Silver, B2Gold, and Royal Gold have RSI levels of 50.7, 63.2, 67.9, and 57.0, respectively.