Reading the Volatilities of the Major Mining Companies



Precious metal funds

Many of the fluctuations in precious metals have been determined by the Federal Reserve’s interest rate stance. These variations play on precious metal funds. Let’s look now at the fundamentals of the South African precious metal miners.

Gold-based funds such as the SPDR Gold Shares (GLD) and the PowerShares DB Gold ETF (DGL) have seen their returns fall in the past few months. On a trailing 30-day basis, these two funds have each fallen 5.6%, although they’ve risen year-to-date.

Let’s look at the implied volatilities of giant mining companies and their RSI (relative strength index) levels in the wake of the carnage in precious metal prices. We’ll look at Sibanye Gold (SBGL), Gold Fields (GFI), Silver Wheaton (SLW), and Pan American Silver (PAAS).

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Implied volatility

Call-implied volatility takes into account the changes in the price of an asset on 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 Sibanye Gold, Gold Fields, Silver Wheaton, and Pan American Silver were 57.3%, 58.8%, 43.0%, and 50.8%, respectively, on October 24, 2016.


The RSI (relative strength index) levels for each of these four mining giants fell due to their falling share prices. However, October 18, 2016, saw a revival in their RSI levels. Sibanye Gold, Gold Fields, Silver Wheaton, and Pan American Silver had RSI levels of 39.7, 36.7, 42.0, and 47.0, respectively.

The trailing 30-day returns of these mining companies are negative due to the diminishing safe-haven appeal of precious metals. Most miners’ RSI levels are trading close to 45.


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