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Giant Miners Plummeted—What about Their Technicals?

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Updated

Revived sentiment

Precious metals prices corrected on September 9, 2016. However, according to CFTC (Commodity Futures Trading Commission) data, hedge funds and money managers hiked their net long positions in COMEX gold contracts to nine-week highs in the week ended September 6 as they also raised bullish stances in silver.

However, the SPDR Gold Trust ETF (GLD), the world’s largest gold-backed ETF, saw its holdings fall 1.1% to 939.9 tons on September 9. GLD was trading 0.66% lower on the day. Another gold-based fund, the Physical Swiss Gold Shares ETF (SGOL), fell 0.62% on the day. The funds maintained trailing-five-day gains of 1.2% each, following gold’s returns.

Let’s look at the volatilities in giant gold-mining companies such as GoldCorp (GG), Barrick Gold (ABX), AngloGold Ashanti (AU), and Harmony Gold (HMY). Together, these three companies contribute a whopping 19.6% to the fluctuations in the VanEck Vectors Gold Miners ETF (GDX).

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Implied volatility

Call-implied volatility takes into account the changes in the price of an asset with respect to variations in the price of its call option. Volatility is higher during times of global and economic turbulence than it is in a stagnant economy.

The volatilities of GG, ABX, AU, and HMY were 43.6%, 47.5%, 50.5%, and 61.3%, respectively, on September 9, 2016.

RSI

The RSIs (relative strength index) for these giant miners also fell considerably on September 9. GG, ABX, AU, and HMY saw RSI levels of 38.6, 35.6, 32.9, and 38.9, respectively. RSI levels for most miners fell back to the 30–40 range.[1. An RSI level of above 70 indicates that a stock has been overbought and could fall, while an RSI level of below 30 indicates that a stock has been oversold and could rise.] 

The trailing-30-day returns of these miners were negative as of September 9.

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