Mining Stocks: How’s the Correlation Trending?

As global turbulence grips markets and investors turn to mining stocks as safe havens, it’s crucial to understand which stocks are closely tied to precious metals. Stocks with a higher correlation to precious metals will likely be impacted more by global indicators that influence precious metals.

Gold and silver-based funds like the iShares Gold Trust (IAU) and the iShares Silver Trust (SLV) have seen massive YTD (year-to-date) gains of 12% and 14.8%, respectively.

Among Franco-Nevada (FNV), Randgold Resources (GOLD), Yamana Gold (AUY), and Pan American Silver (PAAS), Pan American Silver has the lowest correlation with gold, while Yamana Gold has the highest correlation with gold. Over the past three years, only Yamana Gold saw its correlation rise with gold. The other three miners showed a mixed trend.

It’s important for metal investors to study upward and downward trends. Price change predictability can be impacted by rises and falls in precious metal prices.

Yamana Gold’s correlation with gold fell from a three-year correlation of ~0.74 to a one-year correlation of ~0.80. A correlation of ~0.80 means that ~80% of the time, Yamana Gold moved in the same direction as gold.

Most mining shares saw their prices rise due to the revival in precious metals following increased safe-haven bids. Price increases don’t indicate increased correlation.