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Analyzing the Volatility and RSI of Miners

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Precious metal funds

Precious metal mining stocks are known to closely track the performances of precious metals. Precious metal funds such as the Sprott Gold Miners ETF (SGDM) and the Global X Silver Miners ETF (SIL) have risen due to the recent revival of precious metals. Mining stocks are often more volatile than precious metals.

Monitoring the implied volatilities of large mining stocks is important. We should also watch their RSI (relative strength index) levels, particularly in the wake of changing precious metal prices. In this part of the series, we’ll look at Buenaventura Mining (BVN), AngloGold Ashanti (AU), Hecla Mining (HL), and Kinross Gold (KGC).

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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.

As of the last trading day of February 2017, the volatilities of Buenaventura Mining, AngloGold Ashanti, Hecla Mining, and Kinross Gold were 48.5%, 51.3%, 49.1%, and 57.8%, respectively. The volatilities of mining companies are often higher than the volatilities of precious metals.

RSI levels

A 14-day RSI above 70 indicates the possibility of a downward movement in a stock’s price. A level below 30 shows the possibility of an upward movement in price. The RSI levels of the four mining giants mentioned above have fallen drastically due to their falling stock prices.

Buenaventura Mining, AngloGold Ashanti, Hecla Mining, and Kinross Gold have RSI levels of 18.5, 7.9, 16.3, and 15.4, respectively. These dangerously low RSI levels indicate a rebound in prices very soon.

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