uploads///CORRELATION

The Correlation of Miners over the Last Few Years

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May. 4 2018, Updated 12:30 p.m. ET

Correlation analysis

In this final part of the series, we’ll look at the correlation between gold and four mining stocks: B2Gold (BTG), Royal Gold (RGLD), New Gold (NGD), and Newmont Mining (NEM). For the most part, mining stocks move with gold prices. Among these four miners, Newmont has shown the highest correlation with gold this year, while B2Gold has the lowest correlation year-to-date.

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 rose 0.48% and 0.26%, respectively, on Thursday, May 3. 

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Correlation readings

Over the past three years, NGD has seen a declining correlation to gold, while BTG, RGLD, and NEM have seen mixed correlations to gold. NEM saw its three-year correlation to gold rise from 0.68 to a two-year correlation of 0.75 and then drop to a one-year correlation of 0.71. A correlation of 0.71 indicates that about 71% of the time during the last year, NEM moved in the same direction as gold. The rest of the time, it was not correlated to 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 impact the other three precious metals as well as mining stocks.

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