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A Look at Miners’ Technical Indicators

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Mining companies’ reactions

The recent Trump victory initially sparked fear among precious metal investors. However, as the fear reduced, so did precious metal and the mining shares prices.

The Brexit vote in June 2016 also had a significant impact on mining companies and precious metals. Some investors expected choppy markets for precious metal miners once again after Trump’s victory. However, that didn’t happen. Now, the possibility of a December rate hike in the US has started to affect these metals. Typically, mining companies track gold and silver closer than they follow other precious metals.

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Year-to-date (or YTD), Coeur Mining (CDE), Silver Wheaton (SLW), Franco-Nevada (FNV), and Randgold Resources (GOLD) have risen 306.5%, 52.9%, 27.7%, and 17.9%, respectively. The VanEck Vectors Gold Miners ETF (GDX) saw a substantial YTD rise of 55.3%. However, these returns have fallen sharply in the past few months.

Technical indicators

Now, most mining companies are trading below their 100-day moving averages. However, they were trading at discounts to their significant premiums a few months ago. A substantial premium over a stock’s trading price suggests a potential fall in the price, while a discount could indicate a rise in the price. The target prices for the above four mining companies are significantly higher than their current prices, which suggests a positive outlook.

That said, mining companies’ RSI (relative strength index) readings are falling, as are the RSI levels of precious metals. On November 21, 2016, the RSI level for GDX was close to 38. An RSI level above 70 indicates that a stock has been overbought and could fall. An RSI level below 30 indicates that a stock has been oversold and could rise.

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