Analyzing Mining Shares’ Correlation Movement

Meera Shawn - Author

Nov. 7 2017, Published 8:00 a.m. ET

Correlation movement

When investors want to park their money in miners, it’s crucial that they analyze mining stocks’ correlations with gold. Usually, miners take their directional clues from gold. Gold is the most dominant precious metal. It influences the other metals as well as mining shares.

Below, we’ll assess Sibanye Gold (SBGL), Gold Fields (GFI), Silver Wheaton (SLW), and Franco-Nevada (FNV). The mining funds that have a strong correlation with precious metals include the Global X Silver Miners (SIL) and the Sprott Gold Miners (SGDM).

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Trend analysis

On a YTD (year-to-date) basis, the above miners’ correlations appear to be weak—compared to the previous year. Among the four miners, Sibanye Gold has the lowest correlation with gold, while Gold Fields has the highest.

The miners, except Sibanye Gold, have seen an upward trend in their correlations with gold. Silver Wheaton saw it correlation rise from a three-year correlation of 0.70 to three-year correlation of 0.81.

Remember, an increase in the correlation indicates that price changes in gold should play a role in mining stocks’ price changes.

A correlation of 0.81 suggests that in the past year, Silver Wheaton has been taking cues from gold ~81.0% of the time. It means that a rise in gold leads to an increase in Silver Wheaton ~81.0% of the time.


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