How Mining Stocks Correlate to Gold



Miners and precious metals

It’s crucial to understand which stocks are closely tied to precious metals. Global indicators that affect precious metals can have a greater impact on stocks with higher correlations to precious metals.

Precious metals have seen sharp falls in prices, as the upcoming Federal Reserve meeting could result in another interest rate hike. To be sure, rising interest rates not only cause choppy movements in precious metals but also make things rough for mining companies.

Precious metal mining stocks will likely follow the direction of their respective precious metals. However, on a day-to-day basis, the correlation may not be as strong, so price movements can drift from those of metals.

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The mining stocks that saw a revival in their prices over the past one week include the leveraged Direxion Daily Gold Miners (NUGT) and the ProShares Ultra Silver (AGQ). They rose 21.3% and 8.2%, respectively, over the past five trading days. Leveraged funds are often more volatile than regular funds.

Correlation trends

Among Yamana Gold (AUY), Pan American Silver (PAAS), Coeur Mining (CDE), and Barrick Gold (ABX), Coeur Mining has the lowest correlation with gold, while Yamana has the highest correlation with gold. Over the past three years, Pan American and Barrick Gold have seen downward correlations with gold, while Coeur Mining saw an upward trend in its correlation with gold.

Remember, metal investors should monitor upward and downward trends because price change predictability can be affected by rises and falls in precious metal prices.

Pan American’s correlation with gold dropped from a three-year correlation of ~0.57 to a one-year correlation of ~0.53. A correlation of ~0.53 means that ~53% of the time, Pan American has moved in the same direction as gold.


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