What’s the Correlation between Precious Metal Miners and Gold?



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 underperforming their peers.

Mining companies that have high correlations to gold include Royal Gold (RGLD), Goldcorp (GG), NewGold (NGD), and Newmont Mining (NEM). On a YTD (year-to-date) basis, these stocks have risen 133.2%, 55.9%, 147.8%, and 149.6%, respectively. The substantial returns that most mining companies have posted were thanks to the same safe-haven bids that 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 among the four stocks on a YTD basis. Royal Gold is the least correlated to gold.

Goldcorp has seen its correlations to gold rise. The correlation increased from a 0.59 three-year correlation to a 0.64 one-year correlation. A correlation of 0.64 suggests that about 64% of the time, Goldcorp changed in the same direction as gold over the past year. A fall in gold leads to a fall in the price of mining shares. A rise in gold leads to an increase in mining stocks. However, the year-to-date correlation of Goldcorp to gold has fallen.

The relationships of other miners with gold haven’t been stable over the past three years. It could be that silver mining companies don’t track gold as precisely as gold mining companies because their correlations have seen upward and downward movements.

Together, these four stocks make up 19.5% of the VanEck Vectors Gold Miners ETF (GDX).


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