Mining Stocks and Gold Prices: Reading the Correlation

It’s important to understand which mining stocks have overperformed and underperformed precious metals.

Meera Shawn - Author
By

Feb. 27 2017, Published 12:22 p.m. ET

uploads///CORRELATION

Mining stocks and gold

It’s important to understand which mining stocks have overperformed and underperformed precious metals. Precious metal prices have risen since their ten-month lows in December 2016. As a result, most mining stocks have also increased substantially since then.

Mining companies with high correlations to gold include Newmont Mining (NEM), Agnico-Eagle Mines (AEM), Primero Mining (PPP), and Silver Wheaton (SLW). These companies rose significantly YTD (year-to-date) in 2016, and 2017 started with a price revival.

Article continues below advertisement
Article continues below advertisement

Correlation trends

As you can see in the table above, Primero has the closest correlation to gold on a YTD basis among the four miners under review. Newmont is the least correlated with gold on a YTD basis.

All four miners have seen upward and downward movements in their correlation. Primero witnessed a downward movement in its correlation from three years to one year. Primero’s correlation fell from 0.71 three-year correlation to 0.68 one-year. The correlation of 0.68 suggests that about 68% of the time, Primero moved in the same direction as gold in the last year. Usually, a fall in gold leads to falling mining stock prices, and vice versa.

Gold’s relationships to Gold Fields and Pan American haven’t been stable, seeing upward-downward trends. Mining funds that have an apparent correlation to the fluctuations in precious metals include the Physical Swiss Gold Shares (SGOL) and the Physical Silver Shares (SIVR).

Advertisement

Latest Primero Mining Corp News and Updates

    Opt-out of personalized ads

    © Copyright 2024 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.