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Which Miners Have the Strongest Correlation to Gold?

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Precious metals

As the precious metal market is picking up momentum and may be ready to skyrocket, it’s crucial to know which miners are outperforming or underperforming their peers. A shortlist of mining stocks can be vitally important before a precious metal rally.

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Correlation with gold

Precious metal mining shares that correlate strongly with gold include Gold Fields (GFI), New Gold (NGD), Royal Gold (RGLD), and Sibanye Gold Corporation (SBGL). These four shares have risen 51.3%, 69.8%, 78.4%, and 95.4%, respectively, on a YTD (year-to-date) basis.

The substantial returns since the beginning of the year are most likely due to the safe-haven bids that lifted gold and other precious metals. These four companies also witnessed tremendous gains over the past five trading days due to the revival of positive sentiment toward gold.

Upward or downward trend in correlation

As seen in the above chart, Sibanye Gold’s correlation with gold has been increasing over the past three years. From a correlation of 49.3% three years ago, SBGL now has a YTD correlation of 57%. On the other hand, Royal Gold’s correlation with gold has deteriorated over the past two years. The correlation has dropped from 64.8% to 47.1%.

Among the above four miners, Sibanye Gold has the strongest correlation to gold on a YTD basis and is followed by New Gold. The correlation figures of Gold Fields and New Gold haven’t been stable over the past three years.

Together, the above four stocks make up 12.8% of the VanEck Vectors Gold Miners ETF (GDX). GDX has surged a whopping 84.7% YTD.

In the final part of this series, we’ll look at some technical indicators for miners and see whether they’re beating their 100-day moving averages.

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