Miners and Gold Changes: What’s the Correlation?



Correlation with gold

As we know, the precious metal market has skyrocketed in 2016, touching multimonth highs. But it’s crucial for investors to know which mining stocks are overperforming or underperforming their peers. A short list among upstream and downstream stocks can be very important.

Precious metal mining shares that have a high correlation with gold include AngloGold Ashanti (AU), Hecla Mining (HL), Eldorado Gold (EGO), and Alacer Gold (ASR). These four stocks have risen YTD (year-to-date) by 193.5%, 220.1%, 69.7%, and 38.1%, 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 over the past few days due to the revival in positive sentiment for gold after the Brexit vote on June 23.

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Uptrends or downtrends in correlation

As you can see in the above chart, the correlation of AngloGold Ashanti with gold is the highest among the four stocks. AngloGold Ashanti has also seen an increasing correlation with gold over the past three years. From its 55% correlation three years ago, it now has a YTD correlation of 57.1%.

The relationships of the other three miners with gold haven’t been stable over the past three years. There’s been upward and downward momentum in the correlation numbers. The correlation for Alacer Gold has been declining and is thus on a downward momentum.

These four stocks together make up 10.6% of the fluctuations in the VanEck Vectors Gold Miners ETF (GDX). GDX has risen a whopping 17.6% on a 30-day trailing basis.


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