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A Look at Miners’ Volatility in April 2018

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Apr. 17 2018, Updated 2:30 p.m. ET

Mining stock analysis

The recent unrest in the markets has had a significant effect on precious metals and mining companies. The US dollar has a prominent role in influencing dollar-denominated precious metals and mining stocks.

In this part of the series, we’ll look at miners’ RSI (relative strength index) scores and implied volatilities. The miners we’ve selected for our analysis are New Gold (NGD), Newmont Mining (NEM), AngloGold Ashanti (AU), and Hecla Mining (HL).

In the last 30 days, miners have had mixed performances. HL has fallen 5.2% on a trailing-30-day basis. NGD, NEM, and AU have increased 5.7%, 10.8%, and 2.2%, respectively, in the same period.

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Volatility analysis

Implied volatility measures price fluctuations in an asset based on changes in the price of its call option. NGD, NEM, AU, and HL have implied volatilities of 52%, 27.7%, 36.5%, and 42.9%, respectively.

RSI readings

A stock’s RSI score indicates whether it’s overbought or underbought. An RSI level of 70 and above suggests that a stock could be overbought and that its price could fall. An RSI level below 30 indicates that a stock could be oversold and its price could rise. NGD, NEM, AU, and HL have RSI levels of 40.3, 60, 34.8, and 51.3, respectively.

The Sprott Gold Miners ETF (SGDM) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) have also been carefully tracking precious metals. These two funds rose 3.2% and 3.7%, respectively, on April 16, 2018. However, they still show year-to-date falls of 3% and 1.9%, respectively.

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