Reading RSI Numbers of Precious Metal Miners: What’s Next?


Feb. 21 2017, Published 2:16 p.m. ET

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 Global X Silver Miners ETF (SIL) have seen YTD (year-to-date) rises of 19.6% and 23.6%, respectively, as of February 16, 2017. 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 Newmont Mining (NEM), Silver Wheaton (SLW), 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 Newmont Mining, Silver Wheaton, AngloGold Ashanti, and Hecla Mining were 35.0%, 35.3%, 31.6%, and 32.0%, respectively, on February 16, 2017.

RSI levels

The RSI levels for each of these four mining giants rose due to their rising stock prices. Newmont Mining, Silver Wheaton, AngloGold Ashanti, and Hecla Mining had RSI levels of 69.0, 67.4, 83.1, and 80.9, respectively.

A 14-day RSI of more than 70 indicates the possibility of a downward reversal in price. A level below 30 indicates the possibility of an upward reversal. Many mining stocks such as Hecla Mining and AngloGold Ashanti 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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