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Volatility of Precious Metal Mining Stocks

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Precious metal funds

Precious metal mining stocks are known to closely track the performances of precious metals. The Sprott Gold Miners ETF (SGDM) and the Global X Silver Miners ETF (SIL) 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 Buenaventura Mining (BVN), Eldorado Gold (EGO), Kinross Gold (KGC), and Iamgold (IAG).

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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 Buenaventura Mining, Eldorado Gold, Kinross Gold, and Iamgold were 48.5%, 53.1%, 57.8%, and 57.8%, 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. Buenaventura Mining, Eldorado Gold, Kinross Gold, and Iamgold have RSI levels of 59.5, 66.7, 67.3, and 60.9, respectively. These miners have seen reasonable trailing 30-day returns due to rises in the prices of precious metals.

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