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Mining Stocks in 2017: Performance Indicators

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Jan. 20 2017, Published 11:31 a.m. ET

Mining companies’ reactions

Donald Trump’s recent victory in the US Presidential election initially shook fear into precious metal investors. The rate hike phenomenon in December was also negative for precious metal and mining companies.

Prior to that, the UK’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 after Trump’s victory, but that didn’t happen. Remember, mining companies follow precious metals, generally moving in the same direction.

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Specifically, on a YTD (year-to-date) basis, Hecla Mining (HL), Kinross Gold (KGC), IamGold (IAG), and Harmony Gold (HMY) rose 10.1%, 7.4%, 16.9%, and 10%, respectively. These mining companies also saw massive YTD gains in 2016, despite their bad performances in 4Q16. The VanEck Vectors Gold Miners ETF (GDX) saw a YTD rise of 6.8%.

Technical indicators

Most mining companies are now trading below their 100-day moving averages. However, they are above their shorter-term 20-day moving average. IamGold is above it’s 100 as well as 20-day average. 

Remember, 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 increasing. As of January 11, 2016, GDXJ’s RSI level was close to 60.5. 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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