Mining companies regained
Donald Trump’s recent victory in the US presidential election on November 8, 2016, initially resulted in fear among precious metal investors. As these fears subsided, precious metals and mining stocks slowly started falling. The interest rate hike in December 2016 also played negatively for them, and precious metals and their mining companies kept falling.
Some investors expected choppy markets for precious metal mining companies after Trump’s victory, but that didn’t happen. Miners are often known to follow precious metals. Most of the time, they move in the same direction.
On a YTD (year-to-date) basis, Alamos Gold (AGI), First Majestic Silver (AG), B2Gold (BTG), and Royal Gold (RGLD) rose 9.9%, 18.3%, 22.8%, and 10.4%, respectively. These mining companies also saw massive YTD rises in 2016, despite their poor performances in the last quarter. The VanEck Vectors Junior Gold Miners ETF (GDXJ) also saw a YTD rise of 15.1%.
The above four mining companies are trading close to their 100-day moving averages. However, they’re above their shorter-term, 20-day moving averages. Alamos Gold is the only stock that’s below its 20-day moving average.
A substantial premium on a stock’s trading price suggests a potential fall in prices. A discount could indicate a rise in prices. Target prices for these four mining companies are significantly higher than their current prices, which suggests a positive outlook.
Mining companies’ RSI (relative strength index) readings are slowly rising. As of January 26, 2017, GDXJ’s RSI level was close to 52.8. An RSI level above 70 indicates that a stock has been overbought and could fall, while an RSI level below 30 indicates that a stock has been oversold and could rise.