Miners’ correlations with gold
Mining stocks’ correlations with gold are crucial because gold is the big brother of precious metals. The movements in the remaining three precious metals—silver, platinum, and palladium—mostly depend on gold’s movements. Similarly, mining shares take the majority of their movements from gold.
For our correlation analysis, we’ll look at First Majestic Silver (AG), B2Gold (BTG), Royal Gold (RGLD), and Goldcorp (GG). Mining-based funds also have high correlations with precious metals. The Sprott Gold Miners ETF (SGDM) and the iShares MSCI Global Gold Miners ETF (RING), which tend to closely track gold and silver, have fallen 0.47% and 1.8%, respectively, in the last five trading days.
Downward trend in correlation
The above-mentioned four miners have witnessed steady correlations with gold on a YTD (year-to-date) basis. This overall steady correlation may be the result of the small sample size. Among these four miners, only Royal Gold has witnessed a mixed trend in its correlation with gold, while the other three companies have seen continued falling trends in their correlations with gold.
For example, B2Gold has seen its three-year correlation with gold fall from 0.63 to a one-year correlation of 0.51. A correlation of 0.51 indicates that about 51% of the time during the past year, B2Gold has moved in the same direction as gold.
A falling trend in a correlation with gold indicates that gold has been playing a less influential role in moving mining companies. This relationship could change over time, so it’s important to watch them.