Inside the Monthly Mining Correlations as of May 3
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 Physical Silver Shares (SIVR) and the Physical Swiss Gold Shares (SGOL), which have seen losses of 4.3% and 2.3%, respectively, over the past 30 trading days.
Among Alamos Gold (AGI), First Majestic Silver (AG), B2Gold (BTG), and Royal Gold (RGLD), Alamos has the lowest correlation with gold, while Royal Gold has the highest correlation with gold. Over the past three years, all these stocks have seen a downward trend in their correlations 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, First Majestic’s correlation with gold has increased from a three-year correlation of ~0.71 to a year-to-date correlation of ~0.64. The correlation of ~0.64 means that ~64% of the time, Yamana has moved in the same direction as gold.
But it’s also crucial to know if correlations will or won’t stand steady on a month-over-month basis.
We’ll look at the volatility numbers in the next part.