Why Miners Have Outshined Precious Metals

Gold Still on a Downtrend, but Is There Hope for a Reversal?

(Continued from Prior Part)

Miners are happy about gold gains

Mining stocks are often known to amplify the returns in precious metals. Small losses for metals can bring exponential losses to metal miners, and vice versa. Gold and silver rose significantly due to the haven bids. Mining shares also took a breather and overcame their 2015 massive losses.

Let’s look now at the performance of a few crucial gold and silver miners year-to-date. First Majestic Silver (AG), New Gold (NGD), Coeur Mining (CDE), and Iamgold (IAG) have risen 202.1%, 95.7%, 201.1%, and 153.5%, respectively, on a YTD (year-to-date) basis.

On the ETF front, the VanEck Vectors Gold Miners ETF (GDX) has risen 77.8% YTD. Due to the sudden and massive surge in the price of most mining shares, the target prices of all these miners, except Coeur Mining, are below their current trading prices. That suggests a negative outlook.

Technical indicators

First Majestic Silver, New Gold, Coeur Mining, and Iamgold are trading at premiums of 81.6%, 38.8%, 72.9%, and 66.7%, respectively, to their 100-day moving averages. GDX is also trading at a premium of 32.7% to its 100-day moving average. These miners’ prices are also significantly above their 20-day moving averages. But remember, great premiums over long- and short-term averages suggest a possible pullback.

The RSI (relative strength index) readings for these miners are 57–66. An RSI level above 70 indicates that a stock has been overbought and might see a downward revision. A level below 30 indicates that a stock has been oversold and might see an upward revision. GDX’s RSI is around 57.

Browse this series on Market Realist:

• Part 1 - Gold Still on a Downtrend, but Is There Hope for a Reversal?

• Part 2 - What’s Gripping the Precious Metals Market?