How to Read Mining Stock Movement Volatility


Feb. 17 2017, Published 4:54 p.m. ET

Precious metal funds

Precious metal mining stocks are known to track the performances of precious metals closely. The iShares MSCI Global Gold Min (RING) and the VanEck Vectors Junior Gold Miners (GDXJ) have risen due to the recent revival in precious metals. Mining stocks often display more volatility than 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 changing precious metal prices. In this part of the series, we’ll be looking at Randgold Resources (GOLD), Yamana Gold (AUY), Barrick Gold (ABX), and Cia De Minas Buenaventura (BVN).

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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.

On January 26, 2017, the volatilities of Randgold, Yamana, Barrick, and Buenaventura Mining were 33.5%, 56.4%, 38.7%, and 48.5%, respectively.

RSI levels

A 14-day RSI level above 70 indicates the possibility of a downward movement in price. A level below 30 indicates the possibility of an upward movement in price. The RSI levels for these four mining giants have risen due to their rising stock prices.

Specifically, Randgold, Yamana, Barrick, and Buenaventura Mining have RSI levels of 80.9, 61, 73.2, and 59.5, respectively. These miners have seen reasonable trailing-30-day returns due to rises in the prices of precious metals.


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