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The Ups and Downs of Mining Shares in October 2017

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Trend for miners

Mining shares had a mixed pattern in their price reactions on Wednesday, October 11, 2017. Most shares maintained an uptrend, deviating from the fall in precious metals. Often, we see that mining shares and gold move in the same direction. However, that’s not always the case.

In this part of the series, we’ll look at miners’ technical details, including moving averages and RSI (relative strength index) levels. We’ve chosen Royal Gold (RGLD), Goldcorp (GG), Yamana Gold (AUY), and Eldorado Gold (EGO) for our analysis.

Among these four miners, GG, AUY, and EGO have YTD (year-to-date) losses of 1.8%, 6.0%, and 29.8%, respectively, while RGLD has a YTD rise of 39.5%. The Sprott Gold Miners ETF (SGDM), a mining fund, has a YTD rise of 12.7%.

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Moving averages

Two of the four miners are trading above their 100-day moving averages. Eldorado Gold is trading marginally below its 100-day moving average, and Yamana Gold is trading at par with its 100-day moving average. Eldorado and Yamana are trading below their 20-day moving averages.

A reasonably high premium over the 20-day and 100-day moving averages could indicate that their prices may soon fall. However, a significant discount below the 20-day and 100-day moving averages could suggest that prices may rise.

Another important indicator that we consider when analyzing whether an asset is overpriced or underpriced is the RSI level. The RSI level of RGLD, GG, AUY, and EGO are 43.2, 71.2, 45.0, and 51.5, respectively. These levels have risen considerably over the past two weeks.

An RSI level above 70 is an indicator that a stock is overpriced and may soon fall, whereas an RSI lower than 30 indicates that the stock is underpriced and may rapidly rise.

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