Which Miners Have a Downward Trend in Correlation to Gold?
When an investor is looking for investment in the mining sector, it’s important to look at the relationship between mining shares and gold. A correlational analysis can help us compare price movements in mining shares and read which stocks closely follow precious metal changes and which do not.
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Funds such as the Global X Silver Miners ETF (SIL) and the Sprott Gold Miners ETF (SGDM) also have a correlation with gold. These two funds saw a drop in their prices of 1.6% and 0.15%, respectively, on June 19, 2017, as precious metals tumbled.
Among these miners, Royal Gold (RGLD) has the highest correlation with gold, while Alamos Gold (AGI) has the lowest correlation. Over the past three years, all four miners have seen a declining correlation to gold.
A rise in correlation means it’s more likely a stock could closely track precious metals. However, a drop means that a rise in metals is more likely to bring about a fall in the miners and vice versa.
First Majestic Silver (AG) has a three-year correlation of ~0.71 with gold and a year-to-date correlation of ~0.64. A correlation of ~0.64 means that First Majestic Silver has moved in the same direction as gold ~64% 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.