Gold is the most influential
As we’ve been discussing in this series, gold tends to influence the movements of precious metals miners. In this article, we’ll focus on the correlations of selected miners with gold. Gold also tends to dominate the precious metals: silver, platinum, and palladium are known to closely track its movements.
Among the miners we’ve selected for analysis—Royal Gold (RGLD), Goldcorp (GG), Agnico Eagle Mines (AEM), and Franco-Nevada (FNV)—AEM has the highest correlation with gold, while RGLD has the lowest correlation with gold YTD (year-to-date).
The famous gold- and silver-based mining ETFs that also track the correlations of gold and silver with miners are the Global X Silver Miners ETF (SIL) and the VanEck Vectors Gold Miners ETF (GDX). These ETFs have fallen 5% and 3.9%, respectively, YTD, mainly owing to the slump in precious metals.
Over the past three years, all four miners under discussion have seen falling correlations with gold. FNV’s three-year correlation with gold has fallen from 0.73 to a two-year correlation of 0.71. It currently has a YTD correlation of 0.49 with gold, which indicates that ~49% of the time since the start of 2018, FNV has moved in the same direction as gold, while rest of the time, its movements haven’t correlated with gold’s movements. A falling correlation indicates that gold has less of an influence on a company’s price.