Analyzing the Volatility of Mining Stocks



Precious metal funds

Precious metal mining stocks are known to closely track the performances of their respective precious metals. The SPDR S&P Metals and Mining ETF (XME) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) have seen YTD (year-to-date) rises of 14.4% and 32.6%, respectively, as of February 14, 2017. Notably, mining stocks often show more volatility than precious 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 a rebound in precious metal prices. Next, let’s look at Coeur Mining (CDE), Barrick Gold (ABX), AngloGold Ashanti (AU), and Hecla Mining (HL).

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Implied volatility

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 Coeur, Barrick, AngloGold, and Hecla were 61%, 38.7%, 51.3%, and 49.1%, respectively, on February 14, 2017.

RSI levels

The RSI levels for each of these four mining giants rose due to their rising share prices. Coeur, Barrick, AngloGold, and Hecla had RSI levels of 28.4, 68.5, 63.3, and 57.5, respectively.

A 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 reversal.

These technical numbers could be helpful to investors in the precious metal mining industry. Investors often look at the comparative performances of mining shares.


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