Mining correlations with precious metals
Turbulence in markets due to the viability of the Trump Administration, the upcoming French elections, and the Brexit vote caused precious metals to rise. As a result, it boosted mining stocks.
For investors interested in parking their money in mining stocks, it’s crucial to understand which stocks are closely tied to precious metals. Stocks with higher correlations to precious metals will likely be impacted more by global indicators that influence precious metals.
The Physical Swiss Gold Shares (SGOL) and the Physical Silver Shares (SIVR) have seen significant correlations with their respective precious metals. These two funds closely track the performance of their respective metals and have risen 8.9% and 14.2%, respectively, on a YTD basis.
Among Sibanye Gold (SBGL), Gold Fields (GFI), Pan American Silver (PAAS), and Coeur Mining (CDE), Pan American has the lowest correlation with gold, while Gold Fields has the highest correlation with gold. Over the past three years, Sibanye and Gold Fields have seen upward correlations with gold.
Studying the upward and downward trends is important for metal investors, as price change predictability can be affected by rises and falls in precious metal prices.
Gold Fields’ correlation with gold has increased from a three-year correlation of ~0.77 to a one-year correlation of ~0.80. A correlation of ~0.80 means that ~80.0% of the time, Gold Fields has moved in the same direction as gold over the past year.