A Correlational Analysis of Miners and Gold in December 2017



Miners’ correlation with gold

Gold is regarded as the most important precious metal, and most miners are known to follow its price trends. In this part of the series, we’ll look at Wheaton Precious Metals (SLW), Franco-Nevada (FNV), Coeur Mining (CDE), and Barrick Gold (ABX).

The prices of mining-based funds are also closely related to those of precious metals. The Global X Silver Miners ETF (SIL) and the VanEck Vectors Junior Gold Miners ETF (GDXJ) have risen 3.8% and 3.7%, respectively, on a trailing-five-day basis. The rebound has been mainly due to price increases following the Fed’s recent meeting.

Reading the trends

Among the four miners we’re examining, Barrick Gold (ABX) has had the highest correlation with gold this year, while Coeur Mining (CDE) has had the lowest correlation. Wheaton Precious Metals’, Barrick’s, and Franco-Nevada’s correlation with gold has fallen, and Coeur Mining’s has been mixed.

Barrick Gold has a three-year correlation reading of 0.66 and a one-year correlation reading of 0.56. A correlation reading of 0.56 suggests that during the past year, Barrick has moved in the same direction as gold about 56% of the time. Miners’ correlation readings are often subject to change, as miners are typically more volatile than precious metals.

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