Inside Mining Stocks at the End of May: Implied Volatility and RSI


Nov. 20 2020, Updated 5:19 p.m. ET

Mining stock evaluation

Investors are, of course, constantly speculating about the impact of the Fed’s upcoming rate hike decision in June on precious metals. While there are many important indicators that investors can keep track of during such times of speculation, we’ll focus here on 14-day RSI (relative strength index) scores and implied volatility.

The iShares Silver Trust (SLV) and iShares Gold Trust (IAU) have regained 2.9% and 0.91%, respectively, on a trailing-five-day basis, likely due to the recent rebound in precious metals. But mining shares have seen losses over the past few days despite this rebound.

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Implied volatility

Call implied volatility considers changes in an asset’s price, given variations in the price of its call option. In times of market turbulence, volatility usually rises.

On May 26, 2017, the implied volatilities of Agnico Eagle Mines (AEM), Silver Wheaton (SLW), Yamana Gold (AUY), and Kinross Gold (KGC) stood at 31.1%, 30.8%, 46.1%, and 47.1%, respectively.

Remember, mining company volatility is often higher than precious metal volatility.

RSI scores

A 14-day RSI score above 70 tells us that a stock price might fall, but a score below 30 indicates that a stock price could rise. The above four mining companies’ scores have risen due to their higher stock prices.

But RSI scores often revive and fall along with rises and falls in company shares. Specifically, Agnico Eagle, Silver Wheaton, Yamana, and Kinross now have RSI scores of 65.6, 63.4, 68.1, 72.5, respectively.

For ongoing updates on this industry, keep checking in with Market Realist’s Metals and Mining page.


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