How Precious Metal Mining Shares Correlate to Gold Prices


Mar. 5 2018, Updated 4:05 p.m. ET

Miners’ correlations with gold

Precious metal mining stocks tend to take their cues from the price of gold. For our correlation analysis, we’ll look at Coeur Mining (CDE), Barrick Gold (ABX), Kinross Gold (KGC), and Eldorado Gold (EGO).

Mining-based funds have a high correlation with precious metals. The VanEck Vectors Junior Gold Miners ETF (GDXJ) and the Global X Silver Miners ETF (SIL) rose 0.56% and 1.6%, respectively, on a five-day trailing basis. However, Friday, March 2 saw a revival for SIL, although GDXJ maintained its downward trend.

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Trend reading

Among the four miners that we’re discussing, Barrick Gold has the highest correlation to gold of 0.88 on a YTD (year-to-date) basis, while Eldorado Gold has the lowest correlation to gold of 0.27 for that same period.

ABX and GOLD have witnessed a downward trend in their correlations to gold over the past three years, while Kinross Gold and Coeur Mining saw mixed trends in correlation. Eldorado Gold’s three-year correlation fell from 0.48 to a one-year correlation of 0.28. A correlation of 0.28 over the past year indicates that about 28% of the time, Eldorado Gold moved in the same direction as gold. The rest of the time, the correlation of Eldorado Gold wasn’t related to gold.

A trend analysis for precious metal miners’ correlations with gold is important since it suggests possible price variations in a particular miner with regard to gold. Gold is the most important of the four precious metals. So the fluctuation in gold could lead to a directional change in other precious metals as well as mining companies.


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