Inside the May Correlation Trends for Precious Metals
Mining stocks and precious metals
As global tumult grips markets and investors turn to mining stocks as safe havens, it’s crucial to understand which stocks are closely tied to precious metals. Stocks with higher correlations to precious metals can be impacted more by global indicators that influence precious metals.
It’s also widely expected that precious metal mining stocks will follow the direction of their respective precious metals. However, on a day-to-day basis, the correlation may not be as strong, and price movements may drift from those of metals.
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The funds that closely follow gold and silver include the VanEck Vectors Junior Gold Miners (GDXJ) and the Sprott Gold Miners (SGDM). These two funds have seen losses of 3.3% and 2.6%, respectively, over the past 30 trading days.
Among Royal Gold (RGLD), Goldcorp (GG), Yamana Gold (AUY), and Pan American Silver (PAAS), Pan American has the lowest correlation with gold, while Yamana has the highest correlation with gold. Over the past three years, Yamana and Goldcorp have seen an upward-scaling correlation to gold, while Royal Gold saw a downward correlation to gold.
Remember, metal investors have to study upward and downward trends because price change predictability can be affected by rises and falls in precious metal prices.
Notably, Yamana’s correlation with gold has increased from a three-year correlation of ~0.74 to a YTD correlation of ~0.80. The correlation of ~0.80 means that ~80% of the time, Yamana has moved in the same direction as gold.
For ongoing updates on this industry, keep checking in with Market Realist’s Metals and Mining page.