Gold Mining Stocks and Volatility



Precious metal funds

Precious metal mining stocks are known to closely track the performances of their respective precious metals. The Sprott Gold Miners ETF (SGDM) and the iShares MSCI Global Gold Min (RING) have seen YTD (year-to-date) rises of 15.1% and 18.3%, respectively, as of February 23. Mining stocks often show more volatility than precious 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 a rebound in precious metal prices. Next, let’s look at First Majestic Silver (AG), New Gold (NGD), Royal Gold (RGLD), and Goldcorp (GG).

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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 First Majestic, New Gold, Royal Gold, and Goldcorp were 65.4%, 61.2%, 35.5%, and 38.8%, respectively, on February 23.

RSI levels

The RSI levels for each of these four mining giants rose due to their rising stock prices. First Majestic, New Gold, Royal Gold, and Goldcorp had RSI levels of 68.9, 30.8, 56.4, and 68.1, respectively.

A 14-day RSI of more than 70 indicates a possibility of a downward reversal in prices. A level below 30 indicates the possibility of an upward reversal. Many mining stocks—such New Gold—may be candidates for a downward correction in price.

These technical numbers could be helpful if you’ve invested in the precious metals mining industry. Investors often look at the comparative performances of mining shares.


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