Keeping an Eye on Mining Stocks’ Correlation with Gold


Mar. 12 2018, Published 3:43 p.m. ET

Miners’ correlations with gold

Mining stocks’ correlation with gold is crucial, as gold is famously known as the big brother of precious metals. The directional move in the remaining three precious metals—silver, platinum, and palladium—often depends on gold. Similarly, mining companies take their movements from gold many times.

For our correlation analysis, we’ll look at Sibanye Gold (SBGL), Gold Fields (GFI), Yamana Gold (AUY), and Pan American Silver (PAAS)Mining-based funds have a high correlation with precious metals, especially Physical Swiss Gold Shares (SGOL) and Physical Silver Shares (SIVR), which tend to closely track gold and silver performance. They increased 0.09% and 0.56%, respectively, on Friday. 

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The above four miners saw a mix of correlation movements over the past three years. SBGL and GFI have seen their correlation to gold drop between 2015 to 2016 while AUY and PAAS saw their correlation with gold fall from 2015 to 2016 but rise between 2016 and 2017.

However, the YTD (year-to-date) correlation for all four miners remains considerably higher. The smaller sample size could have been the reason for such high numbers.

The correlation for GFI has fallen from 0.66 for its three-year correlation to 0.62 for its one-year correlation. A correlation of 0.62 indicates that, about 62% of the time, over the past year, gold has moved in the same direction as gold. The rest of the time, its direction wasn’t correlated to gold.


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