Miners’ correlations with gold
In this part of the series, we’ll look at mining stocks’ correlations with precious metals by comparing their price movements. Specifically, we’ll analyze AngloGold Ashanti (AU), Hecla Mining (HL), Kinross Gold (KGC), and Eldorado Gold (EGO).
Mining funds closely follow precious metals and their trends in price movements. Among the mining funds that have significant YTD (year-to-date) gains are the Sprott Gold Miners ETF (SGDM) and the VanEck Vectors Gold Miners ETF (GDX). These two funds have risen 16.3% and 17.4%, respectively, on a YTD basis.
Among the four miners that we’re looking at, AngloGold has the lowest correlation to gold on a YTD basis, while Kinross has the highest correlation.
Only Kinross has seen a rising trend in its correlation with gold over the past three years. The other three have a mixed upward and downward trend.
Kinross has a three-year correlation of 0.69 and a one-year correlation of 0.75. A correlation of 0.75 suggests that about 75.0% of the time over the past year, Kinross has moved in the same direction as gold.
A correlation study of miners is crucial since the movement of the stocks can be studied by following the changes in precious metals.