Mining Stocks: Gauging Directional Trends
Miners’ correlations with gold
This part of our series looks at mining companies and precious metals by comparing price movements. Specifically, we’ll analyze Randgold Resources (GOLD), Yamana Gold (AUY), Coeur Mining (CDE), and Barrick Gold (ABX).
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Mining funds also closely follow precious metals and trends in price movements. Among the mining funds that have significant YTD (year-to-date) gains is the Sprott Gold Miners ETF (SGDM) and the VanEck Vectors Junior Gold Miners ETF (GDXJ). These two funds have risen 14.7% and 11.8%, respectively, on a year-to-date YTD basis.
Among the four miners that we’re looking at, Randgold has the lowest correlation with gold on a YTD basis, while Yamana has the highest correlation.
Barrick and Yamana have seen a rising trend in their correlation with gold over the past three years. The other three have a mix of upward and downward trends.
Barrick has a three-year correlation of 0.59 and a one-year correlation of 0.65. A correlation of 0.65 suggests that, about 65.0% of the time over the past year, Barrick has moved in the same direction as gold.
A correlation study is crucial since stock movements can be understood through changes in precious metals.