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Reading the 14-Day RSI Levels of Precious Metal Stocks

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Apr. 13 2017, Published 3:49 p.m. ET

Precious metal funds

As investors analyze which mining stocks are most closely linked to gold, it’s also important that they view the essential technicals of the miners they are considering.

Specifically, mining funds such as the Sprott Gold Miners ETF (SGDM) and the iShares MSCI Global Gold Min ETF (RING) saw substantial rises at the beginning of 2017 due to the revival in precious metals.

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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 during a stagnant economy.

On April 11, 2017, the volatilities of Agnico Eagle Mines (AEM), Silver Wheaton (SLW), Franco-Nevada (FNV), and Randgold Resources (GOLD) were 38.2%, 38.3%, 30.2%, and 32.5%, respectively. A mining company’s volatility is often higher than the precious metal’s volatility.

RSI levels revive

A 14-day RSI above 70 indicates the possibility of a downward movement in a stock’s price, whereas 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 all risen due to higher stock prices.

Agnico Eagle Mines, Silver Wheaton, Franco-Nevada, and Randgold have RSI levels of 61.6, 54.1, 75.2, and 59.7, respectively. With the rising prices of these mining stocks, the RSI levels of the respective stocks have risen. The 30-day trailing returns of the mining stocks also saw tremendous increases.

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