uploads/2017/02/RSI-9-1-1-1-1-1-1-1-1.jpg

Where Are Mining Stocks’ Volatilities Pointing?

By

Updated

Precious metals funds

Precious metals 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 risen due to the recent revival in precious metals prices. 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 metals prices. In this article, we’ll focus on Royal Gold (RGLD), Goldcorp (GG), New Gold (NGD), and Newmont Mining (NEM).

Article continues below advertisement

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 it is in a stagnant economy.

On January 26, 2017, the volatilities of Royal Gold, Goldcorp, New Gold, and Newmont were 35.5%, 38.8%, 61.2%, and 37.6%, respectively.

RSI levels

A 14-day RSI level of above 70 indicates the possibility of a downward movement in price, whereas a level of below 30 indicates the possibility of an upward movement in price.

The RSI levels for each of these four mining giants have risen due to their rising stock prices. Royal Gold, Goldcorp, New Gold, and Newmont have RSI levels of 54.1, 71.5, 23.8, and 61.7, respectively. These miners have also seen reasonable trailing-30-day returns, except for Newgold, which has seen a fall of almost 25% in the past month.

Advertisement

More From Market Realist