Analyzing the Volatility and RSI Levels of Mining Companies



Precious metal funds

Many of the fluctuations in precious metals have been a result of the Fed’s stance on the interest rate. These fluctuations also play on precious-metal-based funds.

Gold and silver-based funds such as the Global X Silver Miners Fund (SIL) and the Sprott Gold Miners (SGDM) saw their returns fall in the past few months. These two funds have seen trailing-30-day falls of 10.5% and 11.9%, respectively, although they still carry year-to-date gains.

Now, let’s look at the implied volatilities of mining companies and their RSI (relative strength index) levels in the wake of the carnage among precious metal prices. We’ll look at Newmont Mining (NEM), Sibanye Gold (SBGL), Silver Wheaton (SLW), and Barrick Gold (ABX).

Article continues below advertisement

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. During times of global and economic turbulence, volatility is higher than it is in a stagnant economy.

The volatilities of Newmont, Sibanye, Silver Wheaton, and Barrick were 45.3%, 63.9%, 48.7%, and 49%, respectively, on October 14, 2016.


The RSI of each of these four mining giants fell due to the fall in their share prices. Newmont, Sibanye, Silver Wheaton, and Barrick saw RSI levels of 34.5, 31.3, 32.9, and 36.4, respectively. These four South African miners account for 16.4% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).

An RSI level of above 70 indicates that a stock has been overbought and could fall. An RSI level of below 30 indicates that a stock has been oversold and could rise. The trailing-30-day returns of these mining companies were negative due to the diminishing safe-haven appeal of precious metals.


More From Market Realist