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Tuesday, August 21st, 2018 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

Which Gold Producer Best Mimics Gold Price? A Correlation Perspective

As investing in gold becomes more popular in light of the latest macro developments, the stocks of gold mining companies also have come to the forefront. Obviously, some investors also wanted to focus on the gold theme indirectly to capture the catch-up potential of these gold miners. In this context, it is important to identify the main gold stocks with the highest correlation to gold.

If one looks at the correlation between the stock prices of main gold producers traded in the U.S. market and the gold price on a weekly basis, the following observations can be made:

  • Over the course of the last 10 years, the stocks of major Gold Producers like Barrick Gold (ABX), Goldcorp (GG) and Newmont Mining (NEM) consistently showed a high level of correlation with the gold price. While it is clear that the companies have significantly different fundamentals than gold itself, the consistently high level of correlation somewhat indicates the mental link that investors make when investing in these stocks.
  • Another interesting observation is related to the correlation increase that Yamana Gold’s (AUY) stock has experienced. The last 10 year correlation between the stock and the precious metal is 0.377, whereas the last one year correlation has increased to 0.842. This increase might be explained by the gross margin and debt level improvement that the company achieved in the last decade.
  • A more modest increase is also observed for AngloGold Ashanti (AU) in the more recent years, probably thanks to the betterment in the company’s cash flow.

Gold Company

Market Cap ($bn)

Correlation with Gold Price

(Last 1 year weekly returns)

Correlation with Gold Price

(Last 5 years weekly returns)

Correlation with Gold Price

(Last 10 years weekly returns)

Barrick Gold (ABX)

52.8

0.786

0.787

0.753

GoldCorp (GG)

40.3

0.796

0.783

0.717

Newmont Mining(NEM)

26.8

0.647

0.670

0.657

Anglogold Ashanti ADR (AU)

18.4

0.807

0.560

0.570

Kinross Gold Corp (KGC)

17.7

0.667

0.723

0.645

Silver Wheaton Corp (SLW)

15.9

0.782

0.608

0.568

Yamana Gold (AUY)

9.5

0.842

0.688

0.377

Gold Fields Ltd ADR (GFI)

12.7

0.724

0.675

0.615

Cia de Minas Buenaven

9.1

0.633

0.656

0.625

Source: Bloomberg

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The original article is published at http://www.c2ads.net/full-text-rss/makefulltextfeed.php?url=http://seekingalpha.com/sector/gold-precious.xml&format=rss&submit=Create+Feed


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