Technically speaking, precisely how is gold doing?
Caution is the order of the day when all investors are looking to capitalise, and one should capitalise when other investors are overly cautious. Such is the fickle nature of the world’s financial markets that a thorough understanding of the ebb and flow nature of market movements needs to be taken into consideration.
The markets are driven as much by sentiment, as they are by fundamentals and predictions. These are often expressed in the opinions of leading industry pundits like Warren Buffett, George Soros and others. One such analytical tool available to investors across the board is that of the relative strength index, otherwise known as the RSI.
The RSI of Allied Nevada Gold Corporation
As mentioned earlier, the RSI is a technical analysis tool which measures the momentum of a stock between the values of 0 and 100. A stock is generally considered to be oversold when its RSI value drops below 30.
This is the case with ANV (Allied Nevada Gold Corp), which hit a figure of 29.4 recently. From that point on, the share price plummeted to $4.86. These RSI readings have tremendous impacts on the investing decisions of traders.
The short and sweet of it is that when the figure has dropped below 30, the share price will mirror that movement. Like all movements in the financial markets, this can have a twofold effect. Either it can act as a catalyst to encourage investors to snap up additional stocks of Allied Nevada Gold Corp, or it can act as a harbinger of a protracted negative trend which will lead to bigger selloffs.
Evaluating the long-term performance of Allied Nevada Gold Corporation is as simple as measuring the peaks and troughs of the stock’s performance over a 52 week period. It is clear from the data that around this time in 2012, the stock price was hovering between $25 and $30 per share. ANV shares entered an upward climb from August 2012 all the way to the middle of October 2012.
They peaked at just over $40 per share by the end of October. From November to the present day, the shares have followed a negative trend, rapidly declining from their 52-week high of $40 + to the August 6 low of $4.86 per share in 2013.
But precisely what does this mean to a bullish investor – somebody who is upbeat and looking to profit off the weakness of the stock market?
As stated previously, much of the market’s performance is perception based. A bullish investor may perceive the dramatic weakness of Allied Nevada Gold Corp as reflective of the dramatic sell-offs that are taking place – not a fundamental weakness per se. It is likely that the process will be close to exhaustion, thus presenting the bullish investor with an opportunity to buy into the precious metal and shore up its prices to reverse the direction of the declining trend. In other words, large-scale purchases of Allied Nevada Gold Corp may start to take place as the inevitable upswing in this stock begins in the coming weeks ahead.
In terms of percentages, ANV (Allied Nevada Gold) constitutes some 4.88% of the Pure Gold Miners ETF.
Latest Update on Allied Nevada Gold
Financial charts appear to be backing up the reality that the declining gold price – across the board – is especially hard on Allied Nevada Gold Corp. The current share price on the New York Stock Exchange was listed at $4.37. The RSI – the measure of momentum of the stock – is way under 30 at 24.90. This means that the stock is currently being heavily oversold.
In fact, ANV is presently trading at levels 35% lower than its 50-day moving average. Plus, it is 77% lower than its 200 day moving average.
The only upside from this particular stock is that it appears to be 1.39% higher than its 52-week low point. The price earnings ratio is currently standing at 8.92 and the market is in the region of $393 million. This particular company has a massive influence in the exploration of gold in the State of Nevada and it operates the Hycroft Mine.
The Importance of the RSI Yardstick
Investors are encouraged to understand the importance of the RSI in all dealings with stocks and commodities. The relative strength index (RSI) is a technical momentum tool measuring the size of gains to losses. This is done in an attempt to determine how oversold/overbought an asset is.
There are two figures that need to be looked at between 0 and 100. These are 30 and 70. As an RSI approaches the figure 30, it means that the asset is being oversold. As an asset’s RSI figure approaches 70 it means that it is overbought.
Allied Nevada Gold Corporation has consistently been in the 30 or below range for a considerable period of time, leading to its highly depreciated stock value.
RSI is often known as a momentum oscillator, over a specific period of time – usually 52 weeks. Investors are encouraged to watch out for large rises or falls in stock prices as these often indicate that the stocks may be heading towards uncertain territory with the RSI scale.
Market Notice about the Gold Price
The dramatic decline in gold prices this year has many investors concerned. While many gold producers are severely cutting their spending, and placing projects on the backburner, other gold producers are moving in the opposite direction.
At the beginning of 2013, the gold price was listed at $1680 an ounce. The price dropped to approximately $1280 an ounce this week. Spending cuts across the board are slow to take effect, as key market players are looking to wait out the storm before any big decisions regarding this precious metal are made.