In this part of the series, we’ll look at the correlation between gold and four mining stocks: New Gold (NGD), Newmont Mining (NEM), Hecla Mining (HL), and Kinross Gold (KGC). For the most part, mining stocks move in tandem with gold prices. Among these four miners, Newmont has shown the highest correlation with gold this year, while Hecla has shown the lowest correlation.
Mining stocks are highly correlated with gold. The iShares Gold Trust ETF (IAU) and the iShares Silver Trust ETF (SLV) tend to closely track gold and silver, respectively. These funds have risen 0.56% and 0.71%, respectively, on a trailing-five-day basis.
Over the past three years, NGD and HL have seen declining correlations with gold, while NEM and KGC have seen mixed correlations with gold. KGC saw its three-year correlation with gold rise from 0.67 to a two-year correlation of 0.68 and then fall to a one-year correlation of 0.61. A correlation of 0.61 indicates that ~61% of the time during the last year, KGC has moved in the same direction as gold. The rest of the time, it hasn’t been correlated with 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. Fluctuations in gold affect the other three precious metals as well as mining stocks.