Miners and Their Correlations to Gold



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 rose significantly YTD (year-to-date) in 2016, and 2017 started with a price revival. Mining companies often amplify the returns of precious metals. However, the past few weeks have been choppy for these companies.

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Correlation trends

As you can see in the above table, Agnico-Eagle Mines has the closest correlation to gold on a YTD basis among the four miners under review. Alacer Gold is the least correlated with gold, mainly due to its YTD losses.

Alamos Gold saw its correlation to gold rise from a ~0.49 three-year correlation to a ~0.54 one-year correlation. A correlation of ~0.54 suggests that about 54.0% 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 Ashanti, Alacer Gold, and Agnico-Eagle Mines haven’t been stable and have seen an upward-downward trend.

Mining funds that have an obvious correlation to the fluctuations in precious metals include the VanEck Vectors Junior Gold Miners ETF (GDXJ) and the SPDR S& P Metals and Mining ETF (XME).


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