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Reading the Rise of Mining Stocks

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Updated

Mining companies fall

Last week (ended March 24), we saw a sudden upswing in precious metals. The Fed’s rate hike phenomenon now seems to be ancient history, and President Trump’s and US House Republicans’ failed attempt at a new healthcare bill seems to have taken center stage. Consequently, metals have been rising over the past five trading days, and precious metal mining stocks often follow the same route as the metals themselves.

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On a YTD (year-to-date) basis, Sibanye Gold (SBGL), Gold Fields (GFI), Agnico-Eagle Mines (AEM), and Franco-Nevada (FNV) have risen 24.8%, 16.9%, 4.4%, and 8.1%, respectively. Over the past month, many mining stocks were facing YTD losses, though the Vaneck Vectors Gold Miners Fund (GDX) is trading at a YTD gain of 9.6%.

Technical indicators

The four mining stocks mentioned above are trading above their 100-day moving averages—except for Agnico-Eagle, which is trading at a discount to its 100-day moving average. A substantial premium on a stock’s trading price suggests a potential fall in prices, while a discount could indicate a rise in price. 

Notably, the target prices of these four mining companies are significantly higher than their current prices, which suggests a positive outlook.

Low RSI levels

When the RSI (relative strength index) level is above 70, it indicates that a stock has been overbought and could fall. An RSI level below 30 indicates that a stock has been oversold and could rise. Mining companies’ RSI levels appear to be slowly rising. The RSI level for GDX is almost 63.

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