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How Do Miners Correlate with Gold?

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Correlation with gold

The precious metal market has skyrocketed in 2016, touching multi-month highs. However, it’s important for investors to know which mining stocks are overperforming or underperforming their peers.

Precious metal mining stocks that have a high correlation with gold include Agnico Eagle Mines (AEM), AngloGold Ashanti (AU), Barrick Gold (ABX), and Hecla Mining (HL). These four stocks have seen YTD (year-to-date) gains of 97.9%, 135.2%, 177.4%, and 145.7%, respectively. These substantial returns since the beginning of 2016 are most likely due to the same safe-haven bids that have lifted up gold and other precious metals.

Notably, these four companies witnessed tremendous gains on June 23 due to the revival in the safe-haven appeal of gold.

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Uptrends or downtrends in correlation

As seen in the above chart, the correlation for Agnico Eagle is at its highest YTD. Agnico has also seen increasing correlation with gold during the past three years. However, the year-to-date correlation remains lower than it’s been in the past year. From its 57.8% correlation three years ago, it now has a YTD correlation of 60.1%.

The relationship of the other three miners with gold has not been stable over the past three years, and we’ve seen upward and downward momentum in the correlation figures. These four stocks together make up 16.4% of the VanEck Vectors Gold Miners Fund (GDX).

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