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Reading the Technicals of the Mining Stocks

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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, we’ll look at the fundamentals of the South African precious metal miners.

Precious metal–based funds such as the Sprott Gold Miners ETF (SGDM) and the Global X Silver Miners ETF (SIL) have seen their returns fall in the past few months. On a trailing 30-day basis, these two funds have fallen 11.8% and 14.9%, respectively, although they’ve risen year-to-date.

Let’s look at the implied volatilities of large mining stocks and their RSI (relative strength index) levels in the wake of the carnage in precious metal prices. We’ll look at Kinross Gold (KGC), Eldorado Gold (EGO), Alacer Gold (ASR), and IamGold (IAG)

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Implied volatility

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 Kinross Gold, Eldorado Gold, Alacer Gold, and IamGold were 60%, 56.5%, 73.1%, and 66.5%, respectively, on November 21, 2016.

RSI

The RSIs (relative strength indexes) for each of these four mining giants fell due to their falling share prices. Kinross Gold, Eldorado Gold, Alacer Gold, and IamGold saw RSI levels of 38.2, 26.0, 35.5, and 47.3, respectively.

The trailing 30-day returns of most of the mining companies are negative due to the diminishing safe-haven appeal of precious metals.

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