In this part of our series, we’ll be looking at the correlation between gold and four mining stocks: New Gold (NGD), Newmont Mining (NEM), Franco-Nevada (FNV), and Randgold Resources (GOLD). Mining stocks mostly move with gold prices but not always. Among these four miners, Newmont has shown the highest correlation to gold, while Franco Nevada has seen the lowest correlation on a YTD (year-to-date) basis.
Mining stocks have high correlations with gold. The Global X Silver Miners ETF (SIL) and the Sprott Gold Miners (SGDM) also tend to have strong correlations with gold. They’ve risen 3.5% and 3.3%, respectively, during the last month, mainly due to the revival in precious metals.
The four miners that we are discussing except for GOLD have seen a mixed correlation to gold. GOLD’s three-year correlation with gold was 0.73, while its two-year correlation fell to 0.71. Its one-year correlation was at 0.59. A correlation of 0.59 indicates that 59% of the time during the past one year, GOLD has moved in the same direction as gold, while the rest of the time, its direction hasn’t been dependent on gold.
Miners’ correlation with gold is the most crucial correlation for investors, as gold is the most dominant among the four precious metals, and the other three precious metals tend to take their directions from gold.