Precious metal funds
Precious metal mining stocks are known to closely track the performance of metals. The Sprott Gold Miners ETF (SGDM) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) saw year-to-date gains of 8.9% and 14.8%, respectively, on January 11, 2017. Mining stocks often show more volatility than metals.
Next, let’s look at the implied volatilities of large mining stocks and their RSI (relative strength index) levels in the wake of the carnage of precious metal prices. We’ll look at Randgold Resources (GOLD), Yamana Gold (AUY), AngloGold Ashanti (AU), and Hecla Mining (HL).
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 Randgold, Yamana, AngloGold, and Hecla were 40.7%, 64.1%, 52.5%, and 54.2%, respectively, on January 11, 2017. Among the above miners, only Hecla Mining has seen a 30-day trailing loss, whereas most of the mining stocks gained.
The RSI levels for each of these four mining giants rose due to their rising stock prices. Randgold, Yamana, AngloGold, and Hecla had RSI levels of 62.9, 59.1, 56.2, and 53.3, respectively.
A 14-day RSI level above 70 indicates a possibility of a downward reversion in price, whereas a level below 30 indicates a possibility of an upward reversion.