As we know, precious metal mining stocks are tied to metals. When we read about precious metals’ performance, it’s also crucial to analyze precious metal companies.
In this part, we’ll look at the relationship between gold and mining stocks. Mainly, a rise in metals could scale the stocks and a fall could lead to decreasing stock prices.
Lately, the most important determinant for precious metals and mining stock movement has been the interest rate hike. If the rate hike occurs, it could cause precious metals to fall, which would spur weakness for precious metal miners.
Notably, funds like the iShares MSCI Global Gold Min (RING) and the Sprott Gold Miners (SGDM) have risen 2.7% and 0.3%, respectively, over the past 30 trading days. The increase was led by a revival in precious metals.
Among Randgold Resources (GOLD), Yamana Gold (AUY), Pan American Silver (PAAS), and Coeur Mining (CDE), Yamana Gold has the highest correlation with gold, while Pan American has the lowest correlation. Over the past three years, Yamana saw rising correlations with gold, while the other three companies saw a mixed correlation.
Metal investors study upward and downward trends because precious metal prices can influence price change predictability. For example, Yamana Gold has a three-year correlation of ~0.74 with gold and a one-year correlation of ~0.80. The correlation of ~0.80 means that Yamana Gold moved in the same direction as gold ~80% of the time.
It’s important to note that the correlation moves in a different direction at different times.