How Mining Stocks Correlate with Gold



Mining stocks and gold

It’s important to know which mining stocks have overperformed and which ones have underperformed precious metals. Precious metal prices have risen due to uncertainties since Donald Trump’s inauguration on January 20, 2017.

Precious metals could be challenged even more by possible future interest rate hikes. Mining companies that have high correlations with gold include AngloGold Ashanti (AU), Hecla Mining (HL), Kinross Gold (KGC), and Eldorado Gold (EGO). These stocks rose significantly in 2016 and have seen strong starts to 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 the above stocks are closely related to precious metals, Eldorado has the highest correlation to gold year-to-date. Kinross is the least correlated to gold. Over the past three years, AngloGold Ashanti has seen an upward-trending correlation to gold. The other three miners discussed above have a mixed relationship to gold.

AngloGold Ashanti’s correlation has risen from a ~0.52 three-year correlation to a ~0.64 year-to-date correlation. A correlation of ~0.64 means that about 64% of the time, AngloGold Ashanti 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 leveraged funds such as the Sprott Gold Miners (SGDM) and the Global X Silver Miners Fund (SIL).


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