Mining shares tend to move with gold prices. For our correlation analysis, we’ll compare gold with four mining stocks: Franco-Nevada (FNV), Randgold Resources (GOLD), Yamana Gold (AUY), and Pan American Silver (PAAS). Mining ETFs also have high correlations with gold.
The iShares MSCI Global Gold Mining ETF (RING) and the Sprott Gold Miners ETF (SGDM) were down 1.1% and 1.3%, respectively, on March 22, 2018. These funds have also seen year-to-date losses of 8.1% and 8.0%, respectively.
On a year-to-date basis, Pan American Silver shows the highest correlation to gold, while Franco-Nevada has the lowest correlation during that period.
During the past three years, Randgold has seen its correlation to gold drop, while FNV, AUY, and PAAS have seen mixed trends in their correlations to gold. FNV’s two-year correlations are higher than its three-year correlations, while the one-year correlations are once again lower.
GOLD’s correlation with gold has dropped from a three-year correlation of 0.74 to a one-year correlation of 0.60. A correlation of 0.60 indicates that about 60.0% of the time during the past one-year period, GOLD has moved in the same direction as gold.
The trend readings of miners’ correlations to gold are crucial, as gold is the most influential of the four precious metals. A change in gold influences the other three precious metals and the mining stocks.