Analyzing Movement in Mining Companies’ Volatility Figures


Dec. 4 2020, Updated 10:53 a.m. ET

Mining stock evaluation

As we discussed in the previous part, the rate hike is playing the most important role in determining precious metal prices. In this part, we’ll discuss technicals that investors should consider before buying mining stocks. We’ll discuss the 14-day RSI (relative strength index) level and miners’ implied volatility.

The Physical Swiss Gold Shares (SGOL) and the Physical Silver Shares (SIVR) have regained 10.1% and 8.5%, respectively, on a year-to-date basis—likely due to the rise in precious metals in 2017. Mining shares have seen losses over the past few days despite the rebound.

Recently, mining shares have seen losses due to ups and downs in metal prices.

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Implied volatility

Implied volatility is the call implied volatility of a stock. It measures changes in an asset’s price with respect to variations in its call option price.

On May 31, 2017, the implied volatilities of Royal Gold (RGLD), Goldcorp (GG), Agnico Eagle Mines (AEM), and Primero Mining (PPP) stood at 26.5%, 30.7%, 32.1%, and 90.6%, respectively. It should be noted that the volatility in Primero Mining is considerably high compared to other mining stocks.

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

RSI scores

A 14-day RSI score above 70 indicates that the stock might be overvalued and price decrease might be around the corner. Similarly, an RSI reading below 30 indicates undervaluation and a price increase might occur.

However, RSI scores often rise and fall when company shares rise and fall. Specifically, Royal Gold, Goldcorp, Agnico Eagle Mines, and Primero Mining have RSI scores of 81.3, 43.1, 59.6, and 30.7, respectively.


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