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Gauging the Direction of Mining Stocks

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Reading mining stocks

As we analyze the performance of the precious metals market, it’s crucial to look at the core mining stocks and also their technical details. Here, we’ll look at technical indicators such as moving averages and YTD (year-to-date) three-month returns.

We’ll compare the performances of Goldcorp (GG), Franco-Nevada (FNV), Pan American Silver (PAAS), and Eldorado Gold (GOLD). Among these four miners, only Franco-Nevada had a YTD gain of 42% while GG, PAAS, and EGO have YTD losses of 2.6%, 2%, and 62.7%, respectively.

One of the most famous precious metal mining–based funds, the VanEck Vectors Junior Gold Miners ETF (GDXJ), saw a marginal YTD rise of 1.1%.

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Moving averages

Goldcorp and Franco-Nevada are trading above their 100-day and 20-day moving averages while Pan American and Eldorado are trading below their shorter-term 20-day moving averages and longer-term 100-day moving averages. A good discount to the 20-day and 100-day moving averages suggests a possible revival in prices while a premium suggests a potential price decline.

The four miners’ target prices are all above their current trading prices, which points to a potential increase in prices—except for Eldorado Gold’s target price, which is below the current trading price, indicating a negative outlook.

RSI indicators

GG, FNV, PAAS, and EGO have RSI (relative strength index) levels of 54.6, 73, 22.4, and 40.8, respectively. An RSI level lower than 30 suggests that we might see upward movement in prices while an RSI higher than 70 indicates a possible price fall. Recently, GDXJ’s RSI was 47.7.

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