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Technical Indicators of Mining Stocks in 2016

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Dec. 4 2020, Updated 10:53 a.m. ET

Reactions of mining companies

Donald Trump’s recent victory in the US presidential election initially produced a sentiment of fear among precious metal investors. But as fears subsided, precious metals and mining stocks slowly started falling.

The United Kingdom’s Brexit referendum in June 2016 also had a significant impact on mining companies and precious metals. Some investors expected choppy markets for precious metal mining companies again after Trump’s victory. But that didn’t happen.

Now, the possibility of a December interest rate hike in the United States has started to affect these metals. Typically, mining companies track gold and silver more closely than they follow other precious metals.

On a YTD (year-to-date) basis, B2Gold (BTG), Royal Gold (RGLD), Newmont Mining (NEM), and Pan American Silver (PAAS) have risen 141.2%, 94.6%, 86.1%, and 177.5%, respectively.

The Global X Silver Miners ETF (SIL) has seen a substantial YTD rise of 94.4%, but these returns have fallen sharply in the past few months.

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Technical indicators

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

A substantial premium on a stock’s trading price suggests a potential fall in prices, while a discount could indicate a rise in prices. 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 December 5, 2016, the RSI level for SIL was close to 44.9. An RSI level above 70 indicates that a stock has been overbought and could fall, while an RSI level below 30 indicates that a stock has been oversold and could rise.

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