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December 23, 2024
PI Global Investments
Precious Metals

Miners Trend Higher, Following Precious Metals


How the Precious Metals Uptrend Has Helped Mining Companies

(Continued from Prior Part)

Best target price

Haven demand has lifted precious metals gold and silver substantially since the beginning of 2016. The rises of these metals have helped mining-based companies, which faced a carnage in 2015.

Companies such as Royal Gold (RGLD), New Gold (NGD), Newmont Mining (NEM), and Hecla Mining (HL) have seen surging returns. These four stocks have gained 37.7%, 67.2%, 47.5%, and 51.9%, respectively, on a year-to-date basis.

The current price of Royal Gold, $50.2, remains considerably lower than its best target price of $51.3 per share. New Gold, Newmont, and Hecla Mining have lower target prices than their current trading prices. This suggests a possible downfall in these stock prices.

Technical indicators

Except for Newmont Mining, which has an RSI (relative strength index) of 67, companies such as Royal Gold, New Gold, and Hecla Mining all have RSIs of above 70. A level of above 70 indicates an overbought scenario and a possible downward revision in price. The RSI for the Market Vectors Gold Miners ETF (GDX) is also below 70.

The trading prices of RGLD, NGD, NEM, and HL are at premiums of 28.3%, 52.2%, 33.2%, and 39.3%, respectively, from their 100-day moving average prices. GDX is also at a premium of 34.4% to its 100-day moving average price. All these stocks are also at considerable premiums over their 20-day moving average prices.

Such gains confirm the ongoing bullish trend in the mining sector. The four companies listed above make up a combined 13.4% of GDX.

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