Are Mining Shares Closely Tracking Precious Metals?



Miners’ performances

Usually, precious metal mining companies follow precious metals. Precious metals seem to be in the doldrums over the strength of the US dollar and the Fed’s decision to raise interest rates. The recent slump in demand for haven assets has also affected mining stocks.

In this part of the series, we’ll look at the primary technical readings—moving averages and RSI (relative strength index) scores—of a select group of miners. The miners we’ve selected for analysis are Gold Fields (GFI), Barrick Gold (ABX), Hecla Mining (HL), and Eldorado Gold (EGO). They’ve fallen 8.4%, 6.8%, 2.5%, and 32.2%, respectively, YTD (year-to-date). The VanEck Vectors Junior Gold Miners ETF (GDXJ) has a YTD loss of 1.9%.

All four miners except EGO rose on Thursday, May 3. EGO fell 4.9%, while GFI and ABX rose 1.3% and 0.82%, respectively. GDXJ rose 1.3%.

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Moving averages

ABX and HL are trading above their 20-day and 100-day moving averages. GFI is trading above its 20-day moving average but below its 100-day moving average.

A stock trading at a considerable discount to its moving average suggests a potential rise in price, while a significant premium indicates a decline. All four miners’ target prices are considerably higher than their current trading prices, suggesting a potential rise.

Relative strength index scores

On May 3, GFI, ABX, HL, and EGO had RSI scores of 52.1, 57.6, 57.3, and 54.7, respectively. The VanEck Vectors Junior Gold Miners ETF (GDXJ) had an RSI score of 49.9. An RSI score above 70 suggests an impending downward price correction, while a score below 30 indicates an upward price correction.


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