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How Mining Stocks Performed in January 2017

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Updated

Reactions of mining companies

Donald Trump’s recent victory in the US presidential election initially shook fear into precious metal investors. The Fed’s recent rate hike was also negative for precious metals and mining companies. Before that, the United Kingdom’s Brexit referendum vote in June 2016 also had a significant impact on mining companies and precious metals.

Some investors expected choppy markets for precious metal mining companies after Trump’s victory, but that didn’t happen. Miners follow precious metals and typically move in the same direction as those metals.

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On a YTD (year-to-date) basis, Coeur Mining (CDE), Barrick Gold (ABX), Hecla Mining (HL), and Kinross Gold (KGC) rose 21.7%, 11.7%, 17.8%, and 14.5%, respectively. These mining companies also saw massive YTD rises in 2016 despite poor performances in the previous quarter. The VanEck Vectors Gold Miners ETF (GDX) also saw a YTD rise of 9.7%.

Technical indicators

Most mining companies are now trading close to their 100-day moving averages. However, the above miners are above their 20-day moving averages. 

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.

Mining companies’ RSI (relative strength index) readings are slowly rising. An RSI level above 70 indicates that a stock has been overbought and could fall, while an RSI below 30 indicates that a stock has been oversold and could rise. On January 26, 2017, the RSI level for the VanEck Vectors Gold Miners ETF (GDX) was ~55.2.

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