Precious metal funds
Precious metal mining stocks are known to closely track the performance of their respective precious metals. Mining-based funds like the SPDR S&P Metals and Mining ETF (XME) and the Vaneck Vectors Junior Gold Miners Fund (GDXJ) have seen YTD (year-to-date) gains of 6.9% and 14.8%, respectively, as of January 11. Notably, mining stocks often show more volatility than metals themselves.
It’s important to monitor the implied volatilities of large mining stocks as well as their RSI (relative strength index) levels, particularly in the wake of the carnage among precious metal prices. Below, we’ll focus on New Gold (NGD), Newmont Mining (NEM), Agnico-Eagle Mines (AEM), and Primero Mining (PPP).
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 in a stagnant economy.
The volatilities of New Gold, Newmont, Agnico-Eagle, and Primero were 62.9%, 41.5%, 46.5%, and 139.4%, respectively, on January 11, 2017. Primero has seen the most volatility of the above stocks and also has seen a 30-day trailing loss, whereas most of the mining stocks have seen gains.
The RSI levels for each of these four mining giants rose due to their rising share prices. New Gold, Newmont, Agnico-Eagle, and Primero had RSI levels of 61.6, 56.3, 59.4, and 45.5, respectively.
The 14-day RSI level of more than 70 indicates the possibility of a downward reversion in price, whereas a level below 30 indicates the possibility of an upward reversion.