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What’s the Correlation between Mining Stocks and Gold?

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Jan. 18 2017, Updated 7:38 a.m. ET

Mining stocks and gold

It’s important to understand which mining stocks overperformed and underperformed precious metals. Precious metal prices have been falling since Donald Trump won the US presidential election on November 8, 2016. As a result, mining stocks have also been falling.

Mining companies that have high correlations with gold include Agnico Eagle Mines (AEM), Alacer Gold (ASR), Alamos Gold (AGI), and AngloGold Ashanti (AU). These companies have risen significantly YTD (year-to-date) in 2016. 2017 also started with a price revival. Mining companies often amplify precious metals’ returns. However, the past few weeks have been choppy for these mining companies.

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Correlation trends

As you can see in the chart above, Agnico Eagle is the most correlated with gold on a YTD basis among the four stocks under review. Alacer is the least correlated with gold, mainly due to its YTD losses.

Alamos Gold saw its correlations to gold rise. Alamos Gold’s correlation rose from a ~0.49 three-year correlation to a ~0.54 one-year correlation. A correlation of ~0.54 suggests that about 54% of the time, Alamos Gold moved in the same direction as gold in the last year. Usually, a fall in gold leads to falls in the prices of mining stocks and vice versa.

The relationships between gold and AngloGold, Alacer, and Agnico haven’t been stable, and have seen an upward-downward trend.

Leveraged mining funds such as the Direxion Daily Junior Gold Miners ETF (JNUG) and the ProShares Ultra Silver ETF (AGQ) rose due to growth in precious metals.

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