Precious metal funds
Many of the fluctuations in precious metals have been determined by the Federal Reserve’s stance on the interest rate, and these fluctuations play on precious metals–based funds.
Gold-based funds such as the PowerShares DB Gold ETF (DGL) and the leveraged Direxion Daily Junior Bull Gold 3X ETF (JNUG) have seen their returns fall in the past few months. These two funds, in particular, have seen trailing-30-day falls of 0.65% and 18.4%, respectively, though their YTD (year-to-date) rises continue to be positive.
Let’s look now at the implied volatilities of mining companies and their RSI (relative strength index) levels after the carnage among precious metals prices. We’ll look specifically at GoldCorp (GG), Newmont Mining (NEM), Agnico-Eagle Mines (AEM), and Barrick Gold (ABX).
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. Remember, during times of global and economic turbulence, volatility is higher than during a stagnant economy.
The volatilities of GG, NEM, AEM, ABX were 44.4%, 41.4%, 42.8%, and 45%, respectively, on September 30, 2016, much lower than their overall volatilities in the previous few months.
The RSIs (relative strength index) of each of these four mining giants fell due to the falls in their share prices. GG, NEM, AEM, and ABX saw RSI levels of 49.4, 46.5, 50.5, and 44, respectively.
These four giant miners make up a combined 25% 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 haven appeal of precious metals.