How Are Miners’ Correlations to Gold Trending?
Precious metal stocks
As we study the impact of the rate hike on precious metals and the mining sector, we should also look at the relationship between these mining stocks and gold. Correlational analysis can help us compare price movement in mining stocks and understand which stocks closely follow precious metal changes, and which don’t.
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Funds such as the Sprott Gold Miners (SGDM) and the iShares MSCI Global Gold Min (RING) also have a correlation with gold. These two funds saw a drop in their price of 3.5% and 3.1%, respectively, on Wednesday, as precious metals tumbled.
Among these miners, Primero has the highest correlation with gold, while Goldcorp has the lowest correlation. Over the past three years, Primero and Goldcorp have seen an upward correlation in their trend, while the two others saw a mixed correlation trend.
An increase in correlation means it’s more likely a stock will carefully track precious metals. An increase in gold could boost miners and vice versa.
Goldcorp has a three-year correlation of ~0.51 with gold and a year-to-date correlation of ~0.61. A correlation of ~0.61 means that Goldcorp has moved in the same direction as gold ~61% of the time over the past year. It’s also important for investors to remember that correlations can move in different directions at different times.