In this part of our series, we’ll look at the correlation between gold and four mining stocks: Franco-Nevada (FNV), Coeur Mining (CDE), Kinross Gold (KGC), and Eldorado Gold (EGO). Mining stocks mostly move with gold prices, but not always. Among these four miners, Kinross has shown the highest correlation with gold this year, while Eldorado Gold has seen a negative correlation.
Mining stocks are highly correlated with gold. The ETFS Physical Swiss Gold Shares ETF (SGOL) and the ETFS Physical Silver Shares ETF (SIVR), which also tend to have a strong correlation with gold, have risen 1.4% and 1.7%, respectively, in the last month.
Over the past three years, EGO has seen its correlation with gold fall, while the other three miners’ correlation with gold has been mixed. KGC’s three-year correlation with gold is 0.67, and its one-year correlation is 0.57, which indicates that ~57% of the time in the last year, KGC has moved in the same direction as gold.
Miners’ correlation trends with gold are a crucial factor for investors to consider because gold is the most prominent of the four main precious metals. Changes in gold affect the other three precious metals as well as mining stocks.