Precious metals funds
Many of the fluctuations in precious metals have been the result of speculation about the Fed’s interest rate stance.
Precious metal–based funds such as the iShares MSCI Global Gold Min (RING) and the Sprott Gold Miners (SGDM) fell over the past few months. On a trailing-30-day basis, these two funds fell substantially. However, they continue to witness year-to-date rises.
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 Gold Fields (GFI), Agnico Eagle Mines (AEM), Primero Mining (PPP), and Randgold Resources (GOLD).
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 Gold Fields, Agnico-Eagle, Primiero, and Randgold were 25.9%, 20.8%, 33.4%, and 15.2%, respectively, on December 5, 2016.
The RSI levels for each of the four mining giants fell due to their falling share prices. Gold Fields, Agnico-Eagle, Primiero, and Randgold saw RSI levels of 36.2, 38.7, 40.1, and 40.3, respectively.
The trailing 30-day returns of most mining companies are negative due to the diminishing safe-haven appeal of precious metals. 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.