Advertisement
U.S. markets open in 2 hours 37 minutes
  • S&P Futures

    5,208.00
    -6.75 (-0.13%)
     
  • Dow Futures

    39,195.00
    -28.00 (-0.07%)
     
  • Nasdaq Futures

    18,199.50
    -32.00 (-0.18%)
     
  • Russell 2000 Futures

    2,046.80
    -3.00 (-0.15%)
     
  • Crude Oil

    82.62
    -0.10 (-0.12%)
     
  • Gold

    2,157.10
    -7.20 (-0.33%)
     
  • Silver

    25.10
    -0.16 (-0.65%)
     
  • EUR/USD

    1.0847
    -0.0029 (-0.27%)
     
  • 10-Yr Bond

    4.3400
    0.0000 (0.00%)
     
  • Vix

    14.57
    +0.24 (+1.67%)
     
  • dólar/libra

    1.2682
    -0.0046 (-0.36%)
     
  • USD/JPY

    150.5220
    +1.4240 (+0.96%)
     
  • Bitcoin USD

    63,326.97
    -4,697.64 (-6.91%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,708.93
    -13.62 (-0.18%)
     
  • Nikkei 225

    40,003.60
    +263.20 (+0.66%)
     

Are Miners’ Exponential Gains Vulnerable to Reversal?

How Inaction from the Major Global Banks Affected Precious Metals

(Continued from Prior Part)

Miners’ performance in 2016

The precious metal miners have received a boost in 2016 year-to-date. From 2013 to 2015, conditions in the market adversely affected the mining sector as precious metals remained downwardly sticky. The miners often are known to amplify the returns in precious metals.

The overall performance of gold in 1Q16 was remarkably positive, as gold claimed its highest quarterly returns in almost three decades. Silver outperformed gold during the past month, rising by a whopping 16.5% compared to gold’s 3% increase.

The initial gains in precious metals helped mining companies to recover the losses they experienced in 2015. Let’s look at the performances of significant gold and silver miners in 2016.

Gold and silver miners First Majestic Silver (AG), Pan American Silver (PAAS), AngloGold Ashanti (AU), and Iamgold (IAG) have risen by 206.4%, 130.2%, 118.2%, and 123.9%, respectively, on a year-to-date basis. The most crucial contributors to the miners’ rally in 2016 have been haven bids.

Even the Market Vectors Gold Miners ETF (GDX) has risen by a whopping 77% year-to-date. With such a sudden surge in metals and miners, current prices for all these miners are considerably higher than gold’s respective best target price, suggesting a possible pullback. It likely seems that if the gains may not be fundamentally sound, a quick reversal of profits is possible.

Technical indicators

AG, PAAS, AU, and IAG are trading at premiums of 203%, 64.9%, 42.6%, and 58.2%, respectively, to their 100-day moving averages. GDX is also trading at a premium of 38.3% to its 100-day moving average. These miners’ prices are also significantly above their 20-day moving averages. Such great premiums over the long- and short-term averages may also suggest a pullback.

The RSI (relative strength index) readings for AG, PAAS, AU, and IAG are at 74, 75, 61, and 67, respectively. An RSI level above 70 indicates that a stock has been overbought and may see a downward revision. A level below 30 indicates that a stock has been oversold and may see an upward revision. GDX’s RSI is 68.

Browse this series on Market Realist:

Advertisement