uploads/2017/02/MINER-16-1-1-1-1-1-1.jpg

Gauging Mining Sentiment Now: What We Can Know

By

Updated

Mining companies regained

Donald Trump’s victory in the 2016 US presidential election initially shook fear into precious metal investors. But uncertainty in the market since then has given air to precious metals and precious metal mining companies. Then, then Federal Reserve’s rate hike in December 2016 pressured precious metals, which have now joined mining companies in a downward trend.

Precious metal mining stocks typically follow precious metals, moving in the same direction. Notably, some investors expected choppy markets for miners after Trump’s victory, but that didn’t happen.

On a YTD (year-to-date) basis, Goldcorp (GG), Eldorado Gold (EGO), Alacer Gold (ASR), IamGold (IAG), and Harmony Gold (HMY) have seen reasonable rises of 14.3%, 31.7%, 21.3%, and 28.9%, respectively.

The VanEck Vectors Gold Miners ETF (GDX) has seen a YTD (year-to-date) rise of 19.0%.

Article continues below advertisement

Technical indicators

The above four mining stocks are trading above their 100-day moving averages and above their 20-day moving averages. However, only Gold Fields is trading below its 20-day and 100-day moving averages. 

Remember, a substantial premium on a stock’s trading price suggests a potential fall in price, while a discount could indicate a rise in price. The target prices for the above four mining companies are significantly higher than their current prices, which suggests a positive outlook.

RSI

An RSI (relative strength index) level above 70 indicates that a stock has been overbought and could fall. An RSI level below 30 indicates that a stock has been oversold and could rise. Mining companies’ RSI readings are slowly rising.

On February 15, 2017, GDX’s RSI level was close to 72. The future interest rate hike could further negatively impact precious metals as well as precious metal miners.

Advertisement

More From Market Realist