How Are Mining Stocks Correlated to Precious Metals?



Miners and precious metals

Upcoming interest rate hike fear took over precious metals and they fell at the beginning of May. Lately, they recovered as “Trump trade” fear resurfaced. Mining companies saw a considerable rise in their price during the past few trading days. The safe-haven bids could have also contributed to rising precious metal prices.

It’s widely expected that precious metal mining stocks will follow the direction of their respective precious metals. Therefore, it’s crucial to understand which stocks are closely tied to precious metals.

Mining funds that saw a revival in their prices over the last week include the Global X Silver Miners (SIL) and the iShares MSCI Global Gold Min (RING). They have risen 2.3% and 0.92%, respectively, over the past five trading days.

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Correlation trends

Among Sibanye Gold (SBGL), Gold Fields (GFI), Silver Wheaton (SLW), and Franco-Nevada (FNV), Sibanye Gold has the lowest correlation with gold and Silver Wheaton has the highest correlation. Over the past three years, all of the miners except Franco-Nevada saw a rising correlation with gold.

Metal investors should study upward and downward trends because price change predictability can be impacted by precious metal prices. Silver Wheaton has a three-year correlation of ~0.70 with gold and a one-year correlation of ~0.81. A correlation of ~0.81 means that Silver Wheaton moved in the same direction as gold ~81% of the time.

It’s important to consider that the correlation of miners to gold might change. Rising prices don’t necessarily mean an increasing correlation.


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