What’s the Correlation between Miners and Gold?


Aug. 26 2016, Updated 6:04 p.m. ET

Mining companies and gold

The precious metals market has skyrocketed in 2016. Despite this trend, it’s crucial for investors to know which mining stocks are overperforming and which are underperforming their peers.

Mining companies that have high correlations with gold include First Majestic Silver (AG), B2Gold (BTG), Royal Gold (RGLD), and GoldCorp (GG). On a YTD (year-to-date) basis, these stocks have risen by 312.5%, 192.2%, 107.7%, and 38.9%, respectively. The substantial returns seen by most mining companies came thanks to safe-haven bids, which boosted gold and other precious metals.

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Correlation trends

As you can see in the table above, GoldCorp is the most correlated with gold on a YTD basis, whereas Royal Gold is the least correlated to gold.

All the gold miners listed above except for First Majestic have seen their correlations with gold rise. Gold’s correlation with GoldCorp has risen from a 0.58 three-year correlation to a 0.63 one-year correlation. A correlation of 0.63 suggests that about 64% of the time, RandGold has moved in the same direction as gold in the past year. A fall in gold leads to falls in the prices of mining stocks. A rise in gold leads to rises in the prices of mining stocks.

First Majestic’s relationship with gold may not be stable because the correlation sees upward and downward movements.

Together, the above-mentioned four stocks make up 14.3% of the VanEck Vectors Gold Miners ETF (GDX).


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