Will Mining Stocks Keep Close Tabs on Precious Metals?



Metals lead miners

Though they belong to the equity category of assets, precious metals mining companies tend to follow precious metals when it comes to their price movements. 

Global implications such as the Federal Reserve’s interest rate hike, political stability, and market uncertainty also play significant roles in determining the prices of mining shares, just as they impact precious metals such as gold and silver.

The rises and falls of precious metals often result in amplified reactions in mining stocks. Often, a rise in gold leads to rises in gold-mining stocks, and vice versa.

Let’s take a look at the technical performances of New Gold (NGD), Newmont Mining (NEM), Buenaventura (BVN), and AngloGold Ashanti (AU).

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Technical indicators

Due to the rises and falls witnessed by precious metals since the beginning of 2017, mining shares have also experienced volatility. New Gold and Newmont have seen YTD (year-to-date) falls of 19.7% and 3.6%, respectively, whereas Buenaventura and AngloGold have seen YTD rises of 13.3% and 2.9%, respectively, as of March 17.

All of the above-mentioned stocks except for Buenaventura are trading at discounts to their short- and long-term moving averages. Considerable discounts to these averages could indicate upward price corrections, while considerable premiums could indicate downward price corrections.

Analysts’ target prices for these mining stocks are significantly higher than their current prices, pointing toward likely rises in their prices.

The RSI level of the VanEck Vectors Junior Gold Miners ETF (GDXJ) is close to 50. The above-mentioned miners’ RSIs are also trading in the 40–50 range.


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