What Are Mining Stock Correlation Trends Telling Us Now?
Mining correlations with precious metals
Amid the turbulence in markets, precious metals started to rise, however temporarily, following the failed GOP attempt at a healthcare bill. And now we’ve begun to see a positive impact on mining shares. Previously, mining shares had been facing losses after Fed’s interest rate hike.
For those investors interested in parking their money in mining stocks, it’s crucial to understand which stocks are closely tied to precious metals—and which aren’t. Stocks with higher correlations to precious metals will likely be even more affected by global indicators that influence precious metals themselves.
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The Physical Swiss Gold Shares (SGOL) and the Physical Silver Shares (SIVR) have seen significant correlations with their respective precious metals. These two funds closely track the performance of their respective metals and have risen 8.9% and 14.2%, respectively, during the past five trading days.
Among New Gold (NGD), Newmont Mining (NEM), Sibanye Gold (SBGL), and Gold Fields (GFI), Sibnaye Gold has the lowest correlation with gold, while Gold Fields has the highest correlation with gold. Over the past three years, all four companies have seen upward correlations with gold.
Remember, studying the upward and downward trends is important for metal investors, as price change predictability can be affected by rises and falls in precious metals prices.
Notably, Gold Fields’ correlation with gold has increased from a three-year correlation of ~0.77 to a one-year correlation of ~0.80. A correlation of ~0.80 means that ~80.0% of the time, Gold Fields has moved in the same direction as gold over the past year.