Are Senior Gold Miners Looking Oversold Based on Technicals?



Moving averages

Traders and investors also look at moving averages while making market entry or exit decisions. Usually, if a stock is trading below its 20-day moving average or 100-day moving average, it’s an indication that the stock is oversold. Similarly, if a stock is trading much higher than its 20-day moving average or 100-day moving average, it indicates an overbought position.

In this part of our series, we’ll see what this technical trend says for gold miners.

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Gold miners’ moving averages

Most of the senior gold miners are currently trading quite close to their respective 50-day and 20-day moving averages. The above table shows the moving averages, forward target prices, and returns of four senior gold miners.

Barrick Gold (ABX), Goldcorp (GG), and Newmont Mining (NEM) are trading 11%, 6%, and 1.6%, respectively, below their 50-day moving averages. Kinross Gold (KGC) is trading 10% above its 50-day moving average.

Relative strength index

As the RSI (relative strength index) approaches the 70 level, it means the asset may be overvalued and is a good candidate for a fall in price. Likewise, if the RSI approaches 30, it’s an indication that the asset may be oversold and could become undervalued.

Based on their May 10, 2017, closing prices, most of the miners are trading closer to or even below 30. Barrick has an RSI level of just 14.0, while GG, NEM, and KGC are trading at 32.0, 42.7, and 53.8, respectively.

As gold prices pulled back in April and May as the safe-haven demand weakened, miners have also shed their gains. The technical indicators point to a near-term potential upside in the senior miners. However, investors should note that technicals could remain in the oversold or overbought position for an extended period.

The VanEck Vectors Gold Miners ETF (GDX) and the SPDR Gold Trust ETF (GLD) are also trading at 3%, above their 100-day moving averages.

Having looked at the technical parameters for gold miners, let’s conclude the series by looking at gold’s fundamental valuations and determine the potential upside or downside.


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