uploads///Technical Indicators

Gold Miners Are Deeply Oversold—Is a Bounce around the Corner?


Aug. 27 2018, Updated 8:00 a.m. ET

Moving averages

In this part of the series, we’ll take a look at senior gold miners’ technical indicators. 

Moving averages help traders and investors make market entry or exit decisions. Usually, if a stock is trading below its moving averages, it indicates that the stock is oversold, and vice versa.

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Gold miners’ moving averages

As we can see in the above table, all the gold miners we’re reviewing in this series are trading at discounts to their 50-day and 20-day moving averages based on their closing prices on August 17. Kinross Gold (KGC) is trading at the highest discount of 19.4% to its 50-day moving average and a discount of 13.7% to its 20-day moving average.

Goldcorp (GG), Barrick Gold (ABX), and Newmont Mining (NEM) are trading 17.7%, 17.4%, and 13.0%, respectively, below their 50-day moving averages.

Extremely oversold position

Usually, an RSI (relative strength index) of 70 or higher is associated with an overbought level. An RSI of 30 or lower indicates that an asset may be oversold and could become undervalued.

All the gold miners under review are trading significantly below the oversold RSI indicator of 30. Kinross is trading at a 14-day RSI of just 10.1, indicating an extremely oversold position.

This oversold position in miners is mainly due to the similar sentiments in the SPDR Gold Shares ETF (GLD) and the VanEck Vectors Gold Miners ETF (GDX), which are trading at 14-day RSI levels of 29.1 and 20.6, respectively. Such an oversold situation usually means that a bounce is around the corner, but investors should note that assets could remain oversold or overbought for an extended period of time.

Having considered the technical parameters for gold miners, let’s conclude this series by looking at gold’s fundamental valuation and determining its potential upside or downside.


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