How Are Mining Stocks Correlated to Gold?


Feb. 28 2017, Updated 9:09 a.m. ET

Mining stocks and gold

It’s important to understand which mining stocks have overperformed and which have underperformed precious metals. Precious metal prices have risen due to uncertainty since Donald Trump was inaugurated as US president. The buoyancy of precious metals could further be challenged by future interest rate hikes, which could also cause mining stocks to fall.

Mining companies that have high correlations with gold include AngloGold Asanti (AU), Hecla Mining (HL), Kinross Gold (KGC), and Eldorado Gold (EGO). These companies rose significantly in 2016, and they’ve seen strong starts in 2017. Although mining companies often amplify the returns of precious metals, they’ve had mixed performances in the past week.

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Correlation trends

While all of the stocks as mentioned above are closely related to precious metals, Eldorado Gold has the highest correlation with gold year-to-date among the miners under discussion. Kinross Gold is the least correlated with gold.

Over the past three years, AngloGold Asanti has seen an upward-trending correlation with gold. The correlations of Hecla Mining, Kinross Gold, and Eldorado Gold have seen upward and downward correlations.

AngloGold Asanti’s (AU) correlation has risen from an ~0.51 three-year correlation to an ~0.53 one-year correlation. A correlation of ~0.53 means that about 53% of the time, AngloGold Asanti has moved in the same direction as gold in the last year. Usually, a fall in gold leads to falls in mining stocks, and vice versa.

Some ETFs that have high correlations with precious metals include the Global X Silver Miners ETF (SIL) and the VanEck Vectors Gold Miners ETF(GDX).


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