Precious metal funds
The important figures that the precious metal investors should monitor are volatility numbers and RSI levels to understand an asset’s relative undervaluation or overvaluation. In particular, investors should watch RSI levels in the wake of changing precious metal prices.
Mining funds such as the Sprott Gold Miners ETF (SGDM) and the Global X Silver Miners (SIL) rose substantially at the beginning of 2017 due to the revival of precious metals. But more recently, in the past month, these funds and mining shares have started to suffer.
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 during a stagnant economy.
As of March 24, 2017, the volatilities of Silver Wheaton (SLW), Anglogold Ashanti (AU), IAMGOLD (IAG), and Harmony Gold (HMY) were 32.6%, 46.9%, 58.1%, and 63.5%, respectively. Remember, a mining company’s volatility is often higher than the precious metal’s volatility.
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 a stock’s price.
The RSI levels of the four mining giants mentioned above have risen due to higher stock prices. Silver Wheaton, Anglogold, IAMGOLD, and Harmony Gold had RSI levels of 58.8, 59.3, 59.9, and 55, respectively. With rises in the prices of these mining shares, the RSI levels of the stocks have risen.