We’ll briefly analyze mining stocks’ correlation with gold. Gold is the most crucial of the precious metals, and mining stocks tend to increasingly take their price changes from gold. We’ll look at Kinross Gold (KGC), Eldorado Gold (EGO), Alacer Gold (ASR), and IamGold (IAG).
Some funds also closely relate to the price changes in gold and the other three precious metals. The Global X Silver Miners (SIL) and the PowerShares DB Gold Fund (DGL) saw downsides of 1.6% and 0.17%, respectively, on Wednesday, December 6.
Among the four miners we’re examining, Kinross Gold had the highest correlation with gold over the past year while Eldorado Gold had the lowest.
All four of the miners we’re discussing have seen a downward trend in correlation over the past three years. The correlation for IamGold Corp has fallen from a three-year correlation of 0.62 to a year-to-date correlation of 0.40. A correlation of 0.40 suggests that about 40% of the time, IamGold moves in the same direction as gold.
The miners’ correlation readings is often subject to change, as the miners are volatile.