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Reading the Movements of Miners’ Correlations with Gold

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Correlation analysis

In this part of our series, we’ll look at the correlation between gold and four mining stocks: Royal Gold (RGLD), Goldcorp (GG), Sibanye Gold (SBGL), and Gold Fields (GFI). Mining stocks mostly move with gold prices, but not always. Among these four miners, Gold Fields has shown the highest correlation with gold, while Royal Gold has seen the lowest correlation with gold on a YTD (year-to-date) basis. 

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Mining stocks have high correlations with gold. The Sprott Gold Miners ETF (SGDM) and the iShares MSCI Global Gold Miners ETF (RING) also tend to have strong correlations with gold. They’ve seen rises of 3.7% and 3.2%, respectively, on a trailing-five-day basis. The revival in gold has been the reason for the funds’ rebounds.

Correlation readings

Among the four miners under discussion, GG has seen its correlation with gold fall over the past three years, while the other three miners have seen mixed correlations with gold. GG has seen its three-year correlation with gold fall from 0.74 to a one-year correlation of 0.64. A correlation of 0.64 indicates that ~64% of the time during the last year, GG has moved in the same direction as gold, while the rest of the time, its direction hasn’t been dependent on gold.

Miners’ correlation trends with gold are a crucial factor for investors to consider because gold is the most prominent of the four precious metals. Changes in gold affect the other three precious metals as well as mining shares.

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