Precious metal funds
Precious metal mining stocks are known to closely track the performances of precious metals. The iShares MSCI Global Gold Miners (RING) and the Global X Silver Miners ETF (SIL) have risen due to the recent revival of precious metals. Mining stocks often display more volatility than precious metals.
It’s important to monitor the implied volatilities of large mining stocks. We should also watch their RSI (relative strength index) levels, particularly in the wake of changing precious metal prices.
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 February 28, 2017, the volatilities of Randgold Resources, Buenaventura, AngloGold Ashanti, and Harmony Gold Mining were 33.9%, 46.6%, 44.3%, and 64.5%, respectively. The volatilities of mining companies are often higher than the volatilities of precious metals.
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 risen due to their rising stock prices.
Randgold Resources, Buenaventura, AngloGold Ashanti, and Harmony Gold Mining have RSI levels of 57.1, 37.1, 32.6, and 44.6, respectively.