Precious metal funds
Many of the fluctuations in precious metals have been a result of speculation about the Federal Reserve’s interest rate stance. In this article, let’s look at the fundamentals of the South African precious metal miners.
Precious-metal-based funds such as the Sprott Gold Miners (SGDM) and the Global X Silver Miners Fund (SIL) have seen their returns fall in the past few months. On a trailing-30-day basis, these two funds have fallen 6.3% and 5.7%, 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 Silver Wheaton (SLW), Yamana Gold (AUY), Pan American Silver (PAAS), and Barrick Gold (ABX).
Call-implied volatility takes into account the changes in an asset’s price due 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 Silver Wheaton, Yamana, Pan American, and Barrick Gold were 46.1%, 63.3%, 54%, and 47.4%, respectively, on November 1, 2016.
The RSIs (relative strength indexes) for each of these four mining giants fell due to their falling share prices. Silver Wheaton, Yamana, Pan American, and Barrick Gold saw RSI levels of 49, 39.7, 50.4, and 63.3, respectively. These miners account for 17.2% of the VanEck Vectors Gold Miners ETF (GDX).
The trailing-30-day returns of most of the mining companies are negative due to the diminishing safe-haven appeal of precious metals.