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Mining Stocks’ Technicals at the Beginning of December

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Mining companies’ reactions

Donald Trump’s recent victory in the US presidential election initially resulted in fear among precious metal investors. As the fear subsided, precious metals and mining stocks slowly started falling. 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 after Trump’s victory. However, that didn’t happen.

Now, the interest rate hike in the US and the forthcoming hikes all have a negative impact on precious metals. Typically, mining companies track gold and silver closer than they follow other precious metals.

Mining stocks like Newmont Mining (NEM), Gold Fields (GFI), Agnico Eagle Mines (AEM), and Silver Wheaton (SLW) saw considerable year-to-date gains.

The Sprott Gold Miners (SGDM) had a substantial YTD rise. However, the returns fell sharply in the past few months.

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Technical indicators

Currently, most mining companies are trading below their 100-day moving averages. However, they were selling at discounts compared to their significant premiums a few months ago. 

A substantial premium over a stock’s trading price suggests a potential fall in the price. 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 along with precious metals’ RSI levels. At the beginning of December, the RSI level for SGDM was close to 44.9. 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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