Reading Technicals of Precious Metal Mining Stocks in February


Feb. 13 2017, Published 4:04 p.m. ET

Precious metal funds

Precious metal mining stocks are known to closely track the performances of their respective precious metals. The SPDR S&P Metals and Mining ETF (XME) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) have seen YTD (year-to-date) rises of 12.3% and 29.6%, respectively, as of February 9, 2017. Notably, mining stocks often show more volatility than precious metals themselves.

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 focus on First Majestic Silver (AG), B2Gold (BTG), 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 Silver, B2Gold, Royal Gold, and Goldcorp were 40.1%, 41.9%, 41.7%, and 42.8%, respectively, on February 9, 2017.

RSI levels

The RSI levels for each of these four mining giants rose due to their rising share prices. First Majestic Silver, B2Gold, Royal Gold, and Goldcorp had RSI levels of 48.6, 39.3, 41.0, and 37.5, respectively.

A 14-day RSI level of more than 70 indicates the possibility of a downward reversion in price, whereas a level below 30 indicates the possibility of an upward reversal.

These technical numbers could be helpful to investors in the precious metal mining industry. Investors often look at the comparative performances of mining shares.


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