A Brief Correlation Study of Mining Stocks as of October 23

When investors park their money into precious metal mining stocks, one of the key technical indicators that they monitor is the correlation of mining stocks with gold. Correlation analysis is important because it gives investors guidance about the potential movement of mining stocks in relation to gold and silver.

Here, we’ll compare B2Gold (BTG), Royal Gold (RGLD), Sibanye Gold (SBGL), and Gold Fields (GFI).

Mining funds such as the iShares MSCI Global Gold Min (RING) and the VanEck Vectors Gold Miners (GDX) also tend to track precious metals closely, and their correlation numbers remain considerably high. These two funds have fallen 1.3% and 1.4%, respectively, on a five-day-trailing basis. During that time, gold has dropped 1.7%.

Among the four miners that we’re analyzing here, Sibanye Gold has the lowest correlation with gold on a one-year basis, while Royal has the highest correlation with gold.

Among the miners that we discuss here, only Gold Fields has seen a rising trend in its correlations with gold over the past three years, while the other three miners have seen a mix of upward and downward trends in their correlations.

The correlation of Gold Fields with gold has risen from a three-year correlation of 0.74 to a one-year correlation of 0.92. Remember, a correlation of 0.92 suggests that Gold Fields has moved in the same direction as gold ~92% of the time during the past year.

It’s also important that we remember that correlation trends keep changing, and so investors have to keep tabs on which miners are more closely associated with gold, and which are not.