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Which Gold producers best “imitate” the price of Gold? Correlation perspective

Gold Correlation Perspective

Which Gold producers best "imitate" the price of Gold? Correlation perspective

Which Gold producers best “imitate” the price of Gold? Correlation perspective

As gold investments become more popular in the light of the latest macroeconomic developments, the shares of gold mining companies are also at the forefront. Obviously, some investors also wanted to focus on the “gold theme” indirectly to capture the potential of gold miners. In this context, it is important to identify the main gold reserves with the highest correlation with gold.

If we consider the relationship between the share prices of the major gold producers traded on the US market and the price of gold every week, the following observations can be made:

Over the last 10 years, the shares of major gold producers such as Barrick Gold (ABX), Goldcorp (NYSE: GG) and Newmont Mining (NYSE: NEM) have consistently shown a high level of correlation with the price of gold. While it is clear that companies have fundamentally different fundamentals than gold itself, the consistently high level of correlation somewhat reflects the mental connection that investors make when investing in these stocks.

Another interesting observation is related to the increase in correlation that Yamana Gold (NYSE: AUY) has. The last 10-year correlation between the stock and the precious metal is 0.377, while the last year has increased to 0.842. This increase can be explained by the gross profit and the improvement in the level of debt that the company has achieved over the last decade.

A more modest increase has also been seen for AngloGold Ashanti (NYSE: AU) in recent years, probably due to the company’s improved cash flow.

Gold Company

Market capitalization ($ billion)

Correlation with the price of Gold 

(Last weekly return of 1 year)

Correlation with the price of Gold 

(Last weekly return of 5 years)

Correlation with the price of Gold

 (Last weekly return for 10 years)

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 (NYSE: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 (NYSE:GFI)

12.7

0.724

0.675

0.615

Cia de Minas Buenaven

9.1

0.633

0.656

0.625

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