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How Miners’ Correlation Is Moving in 2018 so Far

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Mar. 6 2018, Published 12:56 p.m. ET

Miners’ correlations with gold

Precious metal mining stocks tend to take their cues from gold prices. Gold is the most crucial of the four precious metals, and its direction becomes the direction for the other three metals most of the time. For our correlation analysis, we’ll look at Franco-Nevada (FNV), Randgold Resources (GOLD), Yamana Gold (AUY), and Pan American Silver (PAAS). All four miners fell on Monday except for Randgold, which rose 0.62%. FNV, AUY, and PAAS were down 0.62%, 1.7%, and 0.72%, respectively

Mining-based funds have a high correlation with precious metals. The VanEck Vectors Gold Miners ETF (GDX) and the Sprott Gold Miners (SGDM) rose 0.74% on Monday despite the fall in precious metals. 

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Trend reading

Among the four miners we’re discussing, Pan American has the highest correlation to gold of 0.88 on a YTD (year-to-date) basis, while Franco-Nevada has the lowest correlation to gold of 0.72 for that same period.

GOLD has witnessed a downward trend in its correlation with gold over the past three years, while FNV, AUY, and PAAS saw mixed correlation trends. GOLD’s three-year correlation fell from 0.74 to a one-year correlation of 0.63. A correlation of 0.63 over the past year indicates that, about 63% of the time, GOLD moved in the same direction as gold. The rest of the time, GOLD’s correlation wasn’t related to gold.

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