What Do the Fundamentals of the Mining Companies Indicate?



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. In this article, let’s look at the fundamentals of the South African precious metal miners in this article.

Precious metal–based funds such as the Physical Silver Shares ETF (SIVR) and the Physical Swiss Gold Shares ETF (SGOL) have seen their returns fall in the past few months. On a trailing 30-day basis, these two funds have fallen 10.9% and 5.3%, respectively, 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), AngloGold Ashanti (AU), and Harmony Gold (HMY).

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Implied volatility

Call-implied volatility takes into account the changes in an asset’s price 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 Sibnaye Gold, Gold Fields, AngloGold, and Harmony Gold were 58%, 54%, 52%, and 59%, respectively, on October 21, 2016.


The RSIs (relative strength index) for each of these four mining giants fell due to their falling share prices. However, October 18 saw a revival in their RSI levels. Sibnaye Gold, Gold Fields, AngloGold, and Harmony Gold saw RSI levels of 43.6, 42.7, 39.8, and 45.7, respectively. These miners account for 11.5% of the portfolio of the VanEck Vectors Gold Miners ETF (GDX).

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


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