Precious metal funds
Precious metal mining stocks are known to closely track the performance of their respective precious metals. Leveraged mining funds such as the Direxion Daily Gold Miners Bull 3X ETF (NUGT) and the ProShares Ultra Silver (AGQ) have risen 29.1% and 10.1%, respectively, YTD (year-to-date) as of January 26, 2017. Mining stocks often show more volatility than metals.
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 changes in precious metal prices.
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 AngloGold Ashanti, Hecla Mining, Kinross Gold, and Eldorado Gold were 50.8%, 52.3%, 56.6%, and 54.1%, respectively, on January 26, 2017.
RSI levels for each of these four mining giants rose due to their rising share prices. AngloGold Ashanti, Hecla Mining, Kinross Gold, and Eldorado Gold had RSI levels of 51.9, 55.7, 55.4, and 52.0, respectively.
A 14-day RSI level of more than 70 indicates the possibility of a downward movement in price. A level below 30 indicates the possibility of an upward movement.