Precious metal funds
When looking at the performance of mining stocks, it’s crucial to look at their volatility numbers and the RSI levels. This helps in figuring out the comparative overvaluation and undervaluation of the asset. A direction move in mining stocks could have an impact on its RSI, which investors should monitor.
Mining funds such as the VanEck Vectors Junior Gold Miners (GDXJ) and the iShares MSCI Global Gold Min (RING) rose substantially at the beginning of 2017 due to the revival of precious metals. The YTD returns stand at 17% and 14.1%, respectively.
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 April 5, 2017, the volatilities of Hecla Mining (HL), Kinross Gold (KGC), Eldorado Gold (EGO), and IAMGOLD (IAG) were 45.6%, 41.9%, 50.5%, and 47.8%, respectively. A mining company’s volatility is often higher than the volatility 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 a stock’s price.
The RSI levels of the four mining giants mentioned above have risen due to higher stock prices. Hecla, Kinross Gold, Eldorado Gold, and IAMGOLD have RSI levels of 73.5, 63.3, 69.9, and 70.8, respectively. With increases in the prices of these mining stocks, their RSI levels have also risen.