Mining stocks tend to move with gold prices. In this part of the series, we’ll analyze the correlation between gold and these four mining stocks: New Gold (NGD), Newmont Mining (NEM), Agnico-Eagle Mines (AEM), and Franco-Nevada (FNV). Among these miners, Franco-Nevada has the lowest correlation with gold, and Newmont Mining has the highest correlation on a YTD (year-to-date) basis.
Mining funds also have a high correlation with gold. The VanEck Vectors Junior Gold Miners ETF (GDXJ) and the iShares MSCI Global Gold Miners (RING) rose 1.5% and 1.2%, respectively, on Thursday, March 29.
Over the past three years, AEM’s correlation with gold has declined, while the other three miners have seen a mixed correlation to gold during that period.
AEM’s three-year correlation with gold is 0.76, and its one-year correlation is 0.68. A correlation of 0.68 indicates that 68% of the time, AEM has moved in the same direction as gold. The rest of the time, its correlation was not coordinated with gold. FNV’s correlation to gold increased from three years to two years and then fell.
Miners’ correlation trends with gold are a vital factor for investors to consider since gold is the most crucial of the four precious metals. A change in gold typically impacts the other three precious metals as well as mining stocks. During major economic events such as the interest rate hike by the Fed, these relationships become very prominent.