Master Thesis

Golden Shares: The Relationship between Returns of

Gold Mining Firms and the Price of Gold

A case study for listed firms in the US, Australia & Canada

Student Name: Panagiotis Giannakopoulos

ANR: 764724
E-mail:
1. Introduction

Gold is undeniably the oldest and most important asset in economic history. From Croesus’s
golden coins to today’s ETFs on gold, it has been linked to economics for millennia. Gold is
used in jewelries, in manufacturing (electronic connectors) and in investments. For the latter,
investors who want to invest in gold, can do it by purchasing golden coins, bars of gold, shares
of exchange-traded funds on gold or invest in gold mining companies.

This study aims to analyze the exposure of gold mining firms to the price of gold and test how
they react during adverse market conditions. It is interesting to test this because while gold
mining stocks have a significant relationship with gold, they are still ultimately equity.

There are two prevailing theories. The first one is that gold mining stocks are a levered
investment in gold, since they do not only give access to one unit of gold but also a share in the
total future production of the gold miner, therefore the percentage change in the value of the gold
mining stock will be greater than the percentage change in the price of gold. The second theory
suggests that gold mining stocks incorporate other risks that are uncorrelated with the price of
gold, such as political risks, unstable dividends and currency exchange risks among others.

The big increase in the price of gold between 2004 and 2012 provides an additional motivation
for the question of how gold mining firms perform during times of financial crisis. In the period
2008 to 2012 alone, the gold price experienced a 101.1% growth, which made Baur and Glover
(2012) detect a bubble-like behavior in the gold market. This period is also characterized by an
increase in popularity of exchange-traded funds on gold due to their low transaction costs.

Gold has an intrinsic value which does not depend on future earnings and cannot get defaulted.
But what makes it special is its behavior during periods of adverse market conditions. In the
words of Harry Angstrom, “The beauty of gold is it loves bad news” (Economist 26/02/2009).
These words make even more sense in the light of the current surge in the price of gold after the
Brexit referendum. In that context, I prove that during adverse market conditions gold mining
stocks exhibit an increased exposure to the price of gold.

The rest of this research is divided into 4 sections. The first section contains a literature
overview of earlier research. After discussing the most interesting findings of past papers, I
explain how my hypothesis is connected with earlier research. In the second section I provide a
description of my sample and my collection methods. The next section documents the empirical
part of my research and presents my empirical findings. The last section contains a summary of
my main findings and provides concluding remarks.

2. Literature review

Due to the increasing use of gold as an investment, researchers around the world are trying to
understand its behavior and properties. It is only logical therefore for a vast academic literature
to exist on the gold market. Blose and Shieh (1995), using monthly data over the ten year period
1981 through 1990 from a sample of 23 publicly traded gold mining companies, find that the
gold price elasticity of the gold mining stocks is greater than 1. The determinants of the
exposures of North American gold mining firms to fluctuations in gold prices were examined by
Tufano (1998) in which he derived that gold exposures are negatively related to the level and
volatility of gold prices, the firm’s diversification and the amount of hedging done by the firm,
and positively related to the amount of financial leverage held by the firm. He finds a substantial
time-series variation in gold-beta factors and estimates that a 1% change in the price of gold
leads to a 2-10% change in the gold mining stocks due to operating and financial leverage.

The results of Twite (2002) on the Australian gold market are different, since he finds that the
average gold mining stock moves 0.76% for each 1% change in AUD-denominated gold prices
in the period from 1985 to 1998. He runs regressions at different levels of gold prices to show
that gold mining stocks can be represented as a portfolio of gold assets and embedded real
options and argues that simple discounted cash flow models systematically underestimate the
price of gold-mining stocks due to failure to reflect managerial flexibility. Similarly, Baur (2014)
finds that weekly share price returns of Australian gold mining firms move by 0.7% for each 1%
change in the price of USD-denominated gold and 0.4% when gold is denominated in AUD,
while in the monthly sample the relationship becomes 1.1% and 0.75% respectively. Moreover,
he finds that for the 30-year period 1980 – 2010 the average gold beta is around 1 but varies
significantly through time. He argues that the reason for this almost direct exposure to gold is
possibly due to hedging and diversification and because of the fact that Australian gold mining
firms are exposed greatly to the stock market.

One of the main reasons gold is so attractive to investors is its safe haven property. Investors
tend to include safe haven assets in their portfolios in order to protect their wealth in times of
adverse market conditions. Empirical findings by Baur (2011) demonstrate that there is an
inverted asymmetric reaction to positive and negative shocks in the gold market. Investors
interpret positive gold price changes as a signal of increased uncertainty which in turn introduces
higher volatility in the gold market. He argues that gold’s inverted asymmetric volatility
enhances the safe haven property of gold. Baur and McDermott (2010) test the safe haven theory
and they find evidence that the safe haven effect is only present in developed markets and not in
emerging ones. They also find that a common currency denomination (USD) of both stock
indices and gold reduces greatly the safe haven property of gold. Hoang et al (2016) add to the
existing literature with results that suggest gold is not a hedge against inflation in the long-run,
while in the short-run it works as a hedge against inflation only in the United Kingdom, USA and
India. Another study suggests that the role of gold as a safe haven could be under threat though.
A test developed by Phillips et all (2011) is used by Baur and Glover (2012) in order to test
bubble-like behavior in the gold market. They find strong evidence of explosive price behavior
and detect a bubble period (2002 – 2012) only shortly interrupted due to the subprime crisis.

Despite the popular belief that hedging increases firm value, Jin and Jorion (2007) find
negative association between hedging and the value of gold mining firms as measured by
Tobin’s Q ratio. This finding supports the conclusion of Tufano (1996) that hedging in gold
mining companies is driven primarily by managerial risk aversion and not as a tool to maximize
shareholders’ profits.

While this study aims for the relationship between gold mining firms and the price of gold,
reverse causality issues must be taken in account e.g. if a gold mining company discovers a big
gold mine, its share will rise in the short term and the price of gold will fall in the long term due
to increased supply. There is a list of identified factors that drive the price of gold, such as the
USA inflation level, exchange rate and interest rates (Ghosh et al, 2004) and even
macroeconomic news (Christie-David et al, 2000). There is no evidence however about stock
prices affecting the price of gold. On the contrary, Smith (2001) finds no significant correlation
between gold prices and USA stock price indices, while Sjaastad (2008) finds that major gold
producing countries (e.g. Australia and South Africa) have no significant influence on the price
of gold. It is safe therefore to assume there are no reverse causalities issues.

In my research, I use the model introduced by Blose and Shieh (1995) in order to estimate the
exposure of gold mining companies to the price of gold. I confirm and extend their work by
testing the effect of gold on gold mining companies in much wider sample and time period.
Moreover, my sample include the NYSE Arca BUGS Index, thus eliminating for this particular
sub-sample previous interpretations which argued that returns on gold mining stocks can be
explained by hedging and diversification. My findings about the asymmetric gold exposure
confirm and extend the work done by Baur (2014).

3. Sample Description

This section provides a description of the sample of gold prices, gold mining firms, stock index
data and exchange rates. The sample consists of weekly and monthly continuously compounded
stock returns of 53 gold mining firms that are constituents of the NYSE Arca Gold BUGS Index,
the ASX All Ordinaries Gold Equity Index and the TSX Global Gold Index. All stocks are
denominated in local currencies (USD, AUD or CAD) and obtained from Datastream. A large
amount of the firms listed in the BUGS Index are also constituents of the TSX Global Gold
Index, but the BUGS Index is unique, since it was created to provide equity derivative investors
with a “purer” play on gold than was available (Hu 1996). The data cover a 20-year period from
March 15, 1996 until March 15 2016, leading to a number of observations which varies across
firms and ranges between 160 and 1,043 observations for weekly data and between 37 and 240
observations at the monthly frequency. The reason that certain firms contain only a small
numbers of observations is that they became publicly listed companies only recently, e.g.
Primero Mining (in 2008), Pretium Resources (in 2010), Dacian Gold (in 2012) and Sibanye
Gold (in 2013). Osisko Gold Royalties was dropped from the sample, since it went public in
2014, leading to only 92 observations in the weekly sample and 21 at the monthly one. I did not
include daily data in my sample to avoid meaningful biases into reported exposure measure,
especially for infrequently traded stocks (Scholes & Williams 1977) and also to avoid time
disparity, because of the time difference between the North American and Australian markets.

Because my sample contains stocks denominated in three different currencies, I consider gold
prices in local gold markets. I obtained Gold Bullion prices denominated in USD and AUD per
Troy ounce from the London Bullion Market and the Gold Perth Mint respectively, which were
available in Datastream. In order to obtain the Gold Bullion price denominated in Canadian
Dollars, I converted the price denominated in USD using the exchange rates provided by WRDS.
The market returns used in my regressions are the continuously compounded returns of the S&P
500 Index, the ASX 300 Index and the S&P/TSX Composite Index, obtained from Datastream.

Tables 1, 2 and 3 display all gold mining firms and the descriptive statistics of the weekly
share price returns for the constituents of the NYSE Arca Gold BUGS Index, the ASX All
Ordinaries Gold Equity Index and the TSX Global Gold Index respectively. The tables
demonstrate that there is substantial variation in the average weekly returns of firms that are
constituents of the same index as well as between firms from different indices. Most firms
exhibit positive average weekly returns, and as a consequence all three indices do the same, but
the sample contains some firms with negative returns as well (e.g. AngloGold Ashanti and
Newmont Mining). We can also observe that firms also exhibit substantial variation in risk, as
measured by the standard deviation of the returns.

The tables also contain the descriptive statistics for the American, Australian and Canadian
stock market index returns and for the returns of 1 oz. of bullion gold denominated in United
States, Australian and Canadian dollars. The tables show that gold denominated in USD
outperformed the S&P500, ASX300 and the TSX Composite indices. Although a straightforward
comparison between gold returns and returns of gold mining companies cannot be made due to
different sample periods, the ASX All Ordinaries Gold Index seems to outperform gold
denominated both in USD and AUD. This is consistent with the theory that gold mining firms
are a levered investment in gold. On the other side, gold denominated in USD outperforms the
NYSE Gold BUGS Index. This is of no surprise, since the BUGS Index contains companies that
do not hedge their gold production and this is where the companies’ operational costs come into
play.
Table 1
Descriptive statistics for the US firms in the weekly sample, using gold prices denominated in US dollars.

Obs. Mean SD Min Max

BUGS INDEX 992 0.00003 0.0568 -0.311 0.260
BARRICK GOLD 1,043 -0.0007 0.0555 -0.241 0.234
AGNICO EAGLE MINES 1,043 0.00063 0.0688 -0.343 0.306
ALAMOS GOLD 680 0.00286 0.0807 -0.437 0.408
ANGLOGOLD ASHANTI 1,043 -0.00117 0.0627 -0.288 0.288
MINAS BUENAVENTURA 1,034 0.00017 0.0631 -0.329 0.347
ELDORADO GOLD 685 0.00117 0.0750 -0.354 0.281
GOLDCORP 1,043 0.00113 0.0647 -0.367 0.357
GOLD FIELDS 1,043 -0.00114 0.0695 -0.332 0.306
RANDGOLD 713 0.00469 0.0607 -0.195 0.219
HARMONY GOLD 1,043 -0.00131 0.0791 -0.440 0.418
KINROSS GOLD 1,043 -0.00207 0.0764 -0.468 0.443
NEWMONT MINING 1,043 -0.00069 0.0553 -0.197 0.326
NEW GOLD 590 -0.00067 0.0975 -0.793 0.854
SIBANYE GOLD 160 0.00418 0.0915 -0.297 0.277
YAMANA GOLD 655 0.00138 0.0762 -0.345 0.303
Gold 1,043 0.00111 0.0241 -0.133 0.131
S&P500 1,043 0.00110 0.0250 -0.201 0.114

Table 2
Descriptive statistics for the Australian firms in the weekly sample, using gold prices denominated in US
dollars.

Obs. Mean SD Min Max

ASX GOLD INDEX 811 0.00153 0.0468 -0.241 0.179
ALACER GOLD 265 -0.00407 0.0790 -0.383 0.295
ANGLOGOLD ASHANTI 851 -0.00103 0.0570 -0.266 0.276
BEADELL RESOURCES 441 -0.00067 0.122 -0.741 0.671
DACIAN GOLD 173 0.00636 0.101 -0.288 0.425
DORAY MINERALS 317 0.00514 0.108 -0.234 1.240
EVOLUTION MINING 707 0.00062 0.0952 -0.445 0.590
GOLD ROAD RESOURCES 505 0.00223 0.123 -0.628 0.675
KINGSGATE CONS. 1,043 0.0006 0.0875 -0.523 0.673
METALS X 602 -0.00127 0.0881 -0.425 0.284
NEWCREST MINING 1,043 0.00112 0.0599 -0.263 0.223
NEWFIELD RESOURCES 196 0.00483 0.0602 -0.277 0.345
NORTHERN STAR 638 0.00491 0.105 -0.488 0.693
OCEANA GOLD 455 -0.0001 0.0951 -0.322 0.383
PERSEUS MINING 598 0.00141 0.0974 -0.578 0.393
RAMELIUS RESOURCES 675 0.00161 0.108 -0.355 0.995
REGIS RESOURCES 1,043 -0.00182 0.120 -1.273 1.099
RESOLUTE MINING 1,043 -0.00281 0.0838 -0.387 0.325
SARACEN MINERAL 1,043 0.00315 0.138 -1.182 2.284
SILVER LAKE RESOURCES 434 0.00003 0.0980 -0.333 0.460
ST BARBARA 1,043 -0.00059 0.0957 -0.389 0.430
TRIBUNE RESOURCES 1,043 0.00314 0.0942 -0.738 0.571
Gold AUD 1,043 0.00116 0.0237 -0.162 0.233
Gold USD 1,043 0.00111 0.0241 -0.133 0.131
ASX300I 1,043 0.00083 0.0206 -0.172 0.0906
Table 3
Descriptive statistics for the Canadian firms in the weekly sample, using gold prices denominated in US
dollars.

Obs. Mean SD Min Max

TSX GOLD 949 0.0003 0.0504 -0.267 0.206
AGNICO EAGLE MINES 1,043 0.0006 0.0658 -0.301 0.284
ALACER GOLD 708 0.00164 0.0903 -0.433 0.561
ALAMOS GOLD 681 0.00274 0.0744 -0.331 0.318
ANGLOGOLD ASHANTI 1,043 -0.00117 0.0627 -0.288 0.288
ASANKO GOLD 767 0.00328 0.114 -1.139 1.012
B2GOLD 431 -0.00065 0.0823 -0.268 0.527
BARRICK GOLD 1,043 -0.00073 0.0527 -0.229 0.266
CENTERRA GOLD 610 0.00059 0.0976 -0.482 0.680
CHINA GOLD 776 0.00393 0.112 -0.555 0.916
MINAS BUENAVENTURA 1,034 0.00017 0.0631 -0.329 0.347
DETOUR GOLD 475 0.00367 0.0945 -0.489 0.527
ELDORADO GOLD 1,043 -0.00064 0.0893 -0.603 0.429
ENDEAVOUR MINING 1,043 -0.00083 0.0783 -0.456 0.450
FRANCO NEVADA 431 0.00391 0.0517 -0.157 0.288
GOLDCORP 1,043 0.0011 0.0608 -0.351 0.305
GOLD FIELDS 1,043 -0.00114 0.0695 -0.332 0.306
GUYANA GOLDFIELDS 805 0.00279 0.194 -1.529 1.689
IAMGOLD 1,043 -0.00075 0.0747 -0.361 0.394
KINROSS GOLD 1,043 -0.00211 0.0718 -0.443 0.423
KIRKLAND LAKE GOLD 1,043 -0.00009 0.103 -0.539 0.489
KLONDEX MINES 1,043 0.0009 0.149 -0.997 1.609
NEW GOLD 1,043 0.0017 0.102 -0.601 0.693
NEWMONT MINING 1,043 -0.00069 0.0553 -0.197 0.326
NOVAGOLD RESOURCES 1,043 0.00113 0.120 -1.104 0.623
OCEANAGOLD 454 0.00019 0.0984 -0.388 0.553
PREMIER GOLD MINES 498 0.00201 0.0844 -0.278 0.314
PRETIUM RESOURCES 272 0.00025 0.0889 -0.339 0.528
PRIMERO MINING 399 -0.00124 0.137 -0.742 0.916
RANDGOLD RESOURCES 713 0.00469 0.0607 -0.195 0.219
ROYAL GOLD 1,043 0.00149 0.0677 -0.298 0.322
SANDSTORM GOLD 447 0.00407 0.0905 -0.312 1.034
SEMAFO 1,043 -0.00048 0.101 -0.467 0.474
SIBANYE GOLD 160 0.00418 0.0915 -0.297 0.277
TOREX GOLD RESOURCES 1,043 0.00056 0.138 -0.560 0.728
YAMANA GOLD 1,043 -0.00337 0.103 -0.579 0.854
TSX COMPOSITE INDEX 1,043 0.00096 0.0244 -0.175 0.128
Gold CAD 1,043 -0.00013 0.109 -0.460 0.478
Gold USD 1,043 0.00111 0.0241 -0.133 0.131

Since this research analyzes firms that are listed in different indices and denominated in
different currencies, it is important to analyze the role of the currency denomination on the price
of gold. The price of the gold bullion denominated in USD, AUD and CAD is presented in Fig. 1.
The evolution of the price of an ounce of bullion gold in the three currencies shows a relatively
stable relationship between the years 1995 to 2014. In 2014 the price of gold in US Dollars
follows a downward trend, unlike the prices in AUD and CAD, but seems to converge with them
at the beginning of 2015. It is important to note here, that the price of gold denominated in
Canadian Dollars has the biggest volatility out of the three, due to the fact that it was constructed
and therefore the exchange rate with the US Dollar causes serious instability in the gold prices.

4. Empirical Analysis

Τhis section contains an empirical estimation of the gold betas, based on the assumptions
formulated in section 2. First, I estimate Model 1 for all three of my markets and with gold
denominated in USD as well as in local currencies.

𝑅𝑖 = 𝑎𝑖 + 𝛽𝑀,𝑖 𝑅𝑀 + 𝛽𝐺,𝑖 𝑅𝐺 + 𝜀𝑖 (1)

where 𝑅𝑖 , 𝑅𝑀 , and 𝑅𝐺 are the returns of gold mining company i, the market return and the return
of gold respectively. The error tern is given by 𝜀𝑖 and the parameters to estimate are 𝑎𝑖 , 𝛽𝑀,𝑖 and
𝛽𝐺,𝑖 . The exposure of each gold mining firm to the stock market is captured by 𝛽𝑀,𝑖 and the
sensitivity to the price of gold is captured by 𝛽𝐺,𝑖 .
 Table 4 reports the summary of the estimated betas for the three indices using weekly and
monthly continuously compounded returns for different prices of gold, i.e. gold denominated in
US dollars, Australian dollars and Canadian dollars. The table demonstrates that gold betas
increase from weekly to monthly return frequencies, while the market betas slightly decrease
apart from the US market beta which increases. The gold betas vary between 0.415 and 1.621 for
weekly data and between 1.195 and 1.707 for monthly data. Moreover, the table gives us
information about the correlation of equity index returns and gold returns. The correlation
between equity market returns and gold returns denominated in US dollars is -0,003 for the US
market, 0,103 for the Australian market and 0,172 for the Canadian market. The Australian and
Canadian equity markets have a correlation of -0,213 and -0,045 with gold returns denominated
in their respective currencies

The fact that weekly returns yield different results from monthly returns is not surprising.
Investors tend to rely on gold for its “safe haven” properties during times of financial turmoil.
This reaction is depicted better in the monthly frequency, thus leading to higher gold betas
because of the relative illiquidity of some gold mining stocks. This fact supports my decision of
omitting the daily frequency from my sample.

Table 4
Beta estimates for 5 different specifications of Model (1)
Market Gold in USD Gold in AUD Gold in CAD R squared
Weekly
USA 0.332*** 1.621*** 0.517
AUS 1 1.099*** 1.024*** 0.421
AUS 2 0.684*** 1.093*** 0.491
CAN 1 0.0750*** 0.415*** 0.846
CAN 2 0.351*** 1.357*** 0.526

Monthly
USA 0.462*** 1.707*** 0.581
AUS 1 0.983*** 1.195*** 0.468
AUS 2 0.650*** 1.355*** 0.630
CAN 1 0.582*** 1.424*** 0.534
CAN 2 0.314*** 1.428*** 0.577
*,** and *** denote statistical significance at the 10%, 5% and 1% level respectively.
 The NYSE Arca Gold BUGS Index demonstrates the biggest gold beta for both return
frequencies. This finding is consistent with the fact that the BUGS Index offers investors a purer
play on gold since its constituents do not hedge their gold production. The gold beta of 1.621
depicts this sensitivity to gold returns. The ASX All Ordinaries Gold Index on the other hand,
demonstrates a gold beta close to 1 in the weekly sample, for prices of gold denominated in both
US and Australian dollars. This implies that, on average, Australian gold mining firms exhibit a
direct relationship with the price of gold, which means that a 1% change in the price of gold
leads to a 1% change in the value of the gold mining firm. A possible explanation for this gold
elasticity of 1 and therefore a lack of leverage on the gold price is that Australian gold mining
firms are substantially exposed to the Australian equity market. We can observe that the market
betas for the ASX All Ordinaries Gold Index are the highest in the sample in both return
frequencies using gold denominated in both US and Australian dollars. Another possible
explanation could be that a number of the constituents of the ASX All Ordinaries Gold Index are
active not only in gold mining, but also in other mining activities such as silver mining. Baur
(2014) attributes this relationship to gold price hedging and managerial flexibility, which in my
sample is more present in the Australian companies than in the constituents of the BUGS Index.
Finally, we can observe from Table 4 that firms listed in the TSX Global Gold Index give similar
results with the ones listed in the BUGS Index when USD-denominated gold is used. For gold
prices denominated in Canadian Dollars, the monthly frequency yields similar results with USD-
denominated gold with a gold beta of 1.42. Surprisingly, we observe a gold beta of 0.41 in the
weekly frequency. This could be a result of translational differences, since gold prices
denominated in Canadian Dollars were constructed using the exchange rate. Hoang et al (2016)
suggest that the link between gold and the US Dollar, which appeared as a result of the Bretton-
Woods system, can lead to biased results when gold prices are translated to local currencies.

Tables 5, 6 and 7 present the exposure of all gold mining companies to the market and the
price of gold denominated in US dollars in the weekly sample. All firms exhibit positive market
and gold betas with the exception of the Newfield Resources Ltd. (Australia), which exhibits a
market beta of -0.03 and a gold beta of -0.124, both not statistically significant. Newfield
Resources is a much diversified exploration company with advanced diamond projects in Sierra
Leone, a possible explanation for these negative betas. The majority of the companies display
market betas that are smaller than 1. Companies with a market exposure that is equal or greater
to 1:1 are Evolution Mining (𝛽𝑀 = 1), Metals X Ltd. (𝛽𝑀 = 1.29), Perseus Mining Ltd. (𝛽𝑀 =
1.1) and Resolute Mining Ltd. (𝛽𝑀 = 1.07) from Australia, New Gold Inc. (𝛽𝑀 = 1.18) from
the United States and Asanko Gold (𝛽𝑀 = 1) and China Gold Corp. (𝛽𝑀 = 1.09) from Canada.
It is evident once more that Australian-listed companies are exposed more to the equity market
than their North American rivals. Firms in my sample portray a big variation in gold betas, which
range from -0.12 to 1.67 in Australia, from 1.32 to 2.21 in the United States and from 0.47 to
2.19 in Canada. An important observation that we can make is that all firms listed in the NYSE
BUGS Index exhibit a gold beta that is significantly larger than 1 and with a statistical
significance at the 1% level. This finding comes to confirm the initial idea behind the
construction of the index, which was to offer investors an index with companies that do not
hedge their gold production and therefore offer a more direct investment on the price of gold.

Table 5
Estimation results for US-listed companies in the weekly sample for Model (1)
Market Gold R squared Obs.
NYSE ARCA BUGS INDEX 0.332*** 1.621*** 0.517 992
BARRICK GOLD 0.304*** 1.550*** 0.472 1,043
AGNICO EAGLE MINES 0.265*** 1.731*** 0.377 1,043
ALAMOS GOLD 0.963*** 1.432*** 0.313 680
ANGLOGOLD ASHANTI 0.344*** 1.362*** 0.292 1,043
MINAS BUENAVENTURA 0.416*** 1.434*** 0.330 1,034
ELDORADO GOLD 0.700*** 1.567*** 0.367 685
GOLDCORP 0.231*** 1.739*** 0.428 1,043
GOLD FIELDS 0.127* 1.662*** 0.335 1,043
RANDGOLD 0.373*** 1.421*** 0.408 713
HARMONY GOLD 0.151* 1.775*** 0.295 1,043
KINROSS GOLD 0.152* 1.812*** 0.329 1,043
NEWMONT MINING 0.308*** 1.320*** 0.350 1,043
NEW GOLD 1.180*** 1.742*** 0.337 590
SIBANYE GOLD 0.0670 2.213*** 0.316 160
YAMANA GOLD 0.713*** 1.740*** 0.434 655
*,** and *** denote statistical significance at the 10%, 5% and 1% level respectively.
Table 6
Estimation results for Australian-listed companies in the weekly sample for Model (1)
Market Gold R squared Obs.
ASX ALL ORDINARIES GOLD 0.684*** 1.093*** 0.491 811
ALACER GOLD 0.205 1.671*** 0.259 265
ANGLOGOLD ASHANTI 0.446*** 0.793*** 0.164 851
BEADELL RESOURCES 0.945*** 0.935*** 0.090 441
DACIAN GOLD 0.874** 1.137*** 0.090 173
DORAY MINERALS 0.981*** 1.352*** 0.132 317
EVOLUTION MINING 1.003*** 0.935*** 0.134 707
GOLD ROAD RESOURCES 0.469** 0.458** 0.021 505
KINGSGATE CONSOLIDATED 0.727*** 1.001*** 0.115 1,043
METALS X 1.294*** 0.324*** 0.135 602
NEWCREST MINING 0.618*** 1.182*** 0.293 1,043
NEWFIELD RESOURCES -0.0267 -0.124 0.002 196
NORTHERN STAR 0.914*** 0.449*** 0.058 638
OCEANA GOLD 0.872*** 1.180*** 0.187 455
PERSEUS MINING 1.103*** 1.151*** 0.194 598
RAMELIUS RESOURCES 0.839*** 1.183*** 0.126 675
REGIS RESOURCES 0.434** 0.761*** 0.031 1,043
RESOLUTE MINING 1.073*** 1.381*** 0.250 1,043
SARACEN MINERAL 0.815*** 0.681*** 0.032 1,043
SILVERLAKE RESOURCES 0.800*** 1.604*** 0.266 434
ST BARBARA 0.740*** 1.280*** 0.140 1,043
TRIBUNE RESOURCES 0.662*** 0.466*** 0.039 1,043
*** p<0.01, ** p<0.05, * p<0.1

Table 7
Estimation results for Canadian-listed companies in the weekly sample for Model (1)
Market Gold R squared Obs.
TSX GOLD 0.351*** 1.357*** 0.526 949
AGNICO EAGLE MINES 0.473*** 1.500*** 0.366 1,043
ALACER GOLD 0.960*** 0.924*** 0.162 708
ALAMOS GOLD 0.922*** 1.080*** 0.283 681
ANGLOGOLD ASHANTI 0.479*** 1.277*** 0.307 1,043
ASANKO GOLD 1.011*** 0.950*** 0.105 767
B2GOLD 0.599*** 1.133*** 0.213 431
BARRICK GOLD 0.326*** 1.349*** 0.436 1,043
CENTERRA GOLD 0.541*** 1.482*** 0.214 610
CHINA GOLD 1.087*** 1.354*** 0.173 776
MINAS BUENAVENTURA 0.593*** 1.329*** 0.354 1,034
DETOUR GOLD 0.842*** 1.735*** 0.355 475
ELDORADO GOLD 0.632*** 1.681*** 0.263 1,043
ENDEAVOUR MINING 0.790*** 0.876*** 0.156 1,043
FRANCO NEVADA 0.454*** 1.063*** 0.434 431
GOLDCORP 0.389*** 1.501*** 0.411 1,043
GOLD FIELDS 0.310*** 1.608*** 0.344 1,043
GUYANA GOLDFIELDS 0.665** 1.753*** 0.067 805
IAMGOLD 0.467*** 1.569*** 0.306 1,043
 KINROSS GOLD 0.391*** 1.610*** 0.335 1,043
KIRKLAND LAKE GOLD 0.767*** 1.213*** 0.132 1,043
KLONDEX MINES 0.666*** 0.475** 0.021 1,043
NEW GOLD 0.618*** 1.083*** 0.100 1,043
NEWMONT MINING 0.485*** 1.234*** 0.375 1,043
NOVAGOLD RESOURCES 0.422*** 1.428*** 0.099 1,043
OCEANA GOLD 0.848*** 1.414*** 0.246 454
PREMIER GOLD MINES 0.862*** 1.365*** 0.315 498
PRETIUM RESOURCES 0.528** 1.619*** 0.214 272
PRIMERO MINING 0.678*** 0.584** 0.038 399
RANDGOLD RESOURCES 0.566*** 1.322*** 0.432 713
ROYAL GOLD 0.314*** 1.455*** 0.301 1,043
SANDSTORM GOLD 0.335** 1.085*** 0.133 447
SEMAFO 0.399*** 1.307*** 0.117 1,043
SIBANYE GOLD 0.215 2.198*** 0.317 160
TOREX GOLD RESOURCES 0.670*** 0.892*** 0.045 1,043
YAMANA GOLD 0.604*** 1.464*** 0.154 1,043
*,** and *** denote statistical significance at the 10%, 5% and 1% level respectively.

Figure 2 presents a histogram with the results for the market and gold betas for all firms in the
weekly sample for gold prices denominated in USD. Market betas exhibit an average price of 0.6
with a standard deviation of 0.29, while there is an average gold beta of 1.27 with a standard
deviation of 0.43. The fact that the average beta is higher than 1, comes to accept the hypothesis
that gold mining firms are a levered investment in gold.

Figure 2. Histogram of the distribution of market (left) betas and gold (right) betas of all firms in the weekly
sample.
 When gold denominated in local currencies is used, we observe two main differences. The
first one is that when AUD-denominated gold is used, while gold betas remain relatively stable,
Australian firms exhibit much larger market betas, with the ASX All Ordinaries Gold Index
having a market beta of 1.1, a big increase in comparison with the 0.68 when USD-denominated
gold was used. It is not surprising that companies exhibit larger market exposure when the local
currency is used and these results are in agreement with Baur (2014) findings of a market beta of
1.12. The other significant difference is that when CAD-denominated gold prices are used, the
constituents of the TSX Global Gold Index exhibit significantly smaller market and gold betas
than with USD-denominated gold. This is most probably a result of translation differences, since
the exchange rate was used in order to construct the CAD-denominated gold prices.

The analysis of the monthly sample gives relevant, but slightly different results. In the monthly
return frequency, using USD-denominated gold, there are two firms that exhibit negative betas.
Alacer Gold Corp. has a market beta of -0.05 at the Australian Stock Exchange, where is its
secondary listing, but when gold denominated in Australian dollars is used, the market beta
becomes 0.3. The other firm is Sibanye Gold, which exhibits a market beta of -0.71 but a
substantially large gold beta (𝛽𝑀 = 2.95). This is explained by the fact that Sibanye Gold is a
large South African company and is listed as an ADR (American Depository Receipt) in the
NYSE, therefore its share price is largely affected by gold denominated in US dollars but not
from the US equity market. Another difference in the monthly frequency is that while at the
BUGS Index, New Gold Inc. is again the only firm to exhibit a market beta larger than 1, the
majority of the constituents of the ASX All Ordinaries Gold exhibit a market beta that is
significantly larger than 1, that is 9 and 13 firms for gold denominated in USD and AUD
respectively. The same happens with firms listed in Canada, where 12 and 21 firms exhibit a
market beta that is larger than 1 for gold denominated in USD and CAD respectively. We
observe again a big variation in gold betas, which range from 0.05 to 1.73 in Australia, from 1.41
to 2.95 in the United States and from 0.56 to 2.89 in Canada. The mean of the monthly market
betas is 0.78 with a standard deviation of 0.46, while gold betas have an average price of 1.45
with a standard deviation of 0.49. It is evident that the mean of both market and gold betas is
increasing while we move from weekly to monthly return frequencies.
Asymmetric gold exposure

Theory suggests that managerial flexibility allows for gold mining firms to manage their
exposure to alterations in the gold price. Merton (1995) recognizes 3 different risk management
practices that can also be applied to gold mining firms. The first one is hedging, which is
performed by OTC forward sales of gold, exchange-traded futures contracts and gold swaps. The
second practice is insurance, which suggests the use of gold put options. Finally, managers can
manage risk through diversification, by engaging in mining activities besides gold, such as the
mining of silver or uranium. Tufano (1996) argues that the most possible reason behind risk
management in North American gold mining companies is managerial risk aversion.

The fact that gold mining firms manage their gold exposure means that they can actually be
represented as a portfolio of gold assets and embedded real options (Twitte, 2002). In order to
test whether firms in my sample manage their gold exposure, first I identify periods of rising
gold prices and construct a dummy variable that takes the price of 1 when gold prices are going
up, since according to theory that is when the firms’ exposure to gold should increase. The model
used is described bellow

∗
𝑅𝑖 = 𝑎𝑖 + 𝛽𝑀,𝑖 𝑅𝑀 + 𝛽𝐺,𝑖 𝑅𝐺 + 𝛽𝐺,𝑖 𝑅𝐺 𝐷𝐺 + 𝜀𝑖 (2)

where 𝑅𝑖 , 𝑅𝑀 , and 𝑅𝐺 are the returns of gold mining company i, the market return and the return
of gold respectively and 𝐷𝐺 is the dummy variable which takes the price of 1 when there are
positive gold returns. The error tern is given by 𝜀𝑖 and the parameters to estimate are 𝑎𝑖 , 𝛽𝑀,𝑖 ,
∗
𝛽𝐺,𝑖 and 𝛽𝐺,𝑖 . Model (2) is used to test whether there is an increased exposure to gold during
∗ ∗
rising gold prices and this effect will be captured by 𝛽𝐺,𝑖 . If 𝛽𝐺,𝑖 >0 then there is evidence of
asymmetric gold exposure.

Tables 8, 9 and 10 present the estimation results of Model (2) in the weekly frequency for all
∗
firms in my sample and using USD-denominated gold. It is evident from the average 𝛽𝐺,𝑖 that is
equal to 0.07 that gold mining firms exhibit an increased exposure to the price of gold when
there are positive gold returns. The average market beta for Model (2) is 0.61, while the average
gold beta is 1.24, which leads to a gold exposure of 1.31 when there are increasing gold prices.
When we compare those results with the average gold beta of 1.27 from Model (1), we notice
that it lies between the 1.24 and 1.31 estimates from the 2nd model. Given the coefficient
estimates, firms that exhibit a statistically significant asymmetric exposure to the price of gold
are AngloGold Ashanti (𝛽𝐺∗ = 0.65), Silver Lake Resources (𝛽𝐺∗ = 1.1), Harmony Gold (𝛽𝐺∗ =
0.54), Alamos Gold (𝛽𝐺∗ = 0.84), Eldorado Gold (𝛽𝐺∗ = 0.51), Gold Fields (𝛽𝐺∗ = 0.36) and
New Gold ( 𝛽𝐺∗ = 0.71) . Firms with particularly interesting coefficients are Silver Lake
Resources and Northern Star Ltd. The first one because it is the one that gets most affected by
rising gold prices and the latter because it exhibits a coefficient of -0.77 for the interaction term,
meaning that when gold prices are rising, the exposure of Northern Star Ltd. to the price of gold
is becoming smaller.

Table 8
Estimation results for US-listed companies in the weekly sample for Model (2)
R
Market Gold Gold + squared Obs.
NYSE ARCA BUGS INDEX 0.333*** 1.619*** 0.00320 0.517 992
BARRICK GOLD 0.296*** 1.715*** -0.333** 0.474 1,043
AGNICO EAGLE MINES 0.263*** 1.774*** -0.0869 0.377 1,043
ALAMOS GOLD 0.980*** 1.158*** 0.580* 0.317 680
ANGLOGOLD ASHANTI 0.349*** 1.260*** 0.205 0.293 1,043
MINAS BUENAVENTURA 0.414*** 1.489*** -0.112 0.330 1,034
ELDORADO GOLD 0.704*** 1.501*** 0.141 0.367 685
GOLDCORP 0.226*** 1.833*** -0.190 0.428 1,043
GOLD FIELDS 0.134* 1.516*** 0.296 0.336 1,043
RANDGOLD 0.379*** 1.317*** 0.221 0.409 713
HARMONY GOLD 0.164** 1.510*** 0.536** 0.298 1,043
KINROSS GOLD 0.151* 1.841*** -0.0581 0.329 1,043
NEWMONT MINING 0.311*** 1.252*** 0.137 0.350 1,043
NEW GOLD 1.196*** 1.476*** 0.569 0.340 590
SIBANYE GOLD 0.0661 2.241*** -0.0623 0.316 160
YAMANA GOLD 0.724*** 1.557*** 0.390 0.435 655
*,** and *** denote statistical significance at the 10%, 5% and 1% level respectively.

Table 9
Estimation results for Australian-listed companies in the weekly sample for Model (2)
Market Gold Gold + R squared Obs.
ASX GOLD 0.687*** 1.053*** 0.0825 0.491 811
ALACER GOLD 0.206 1.765*** -0.197 0.260 265
ANGLOGOLD ASHANTI 0.470*** 0.483*** 0.646*** 0.173 851
BEADELL RESOURCES 0.946*** 0.921*** 0.0298 0.090 441
DACIAN GOLD 0.874** 1.279** -0.314 0.090 173
DORAY MINERALS 0.981*** 1.334*** 0.0371 0.132 317
EVOLUTION MINING 1.003*** 0.936*** -0.000639 0.134 707
GOLD ROAD RESOURCES 0.480** 0.301 0.334 0.022 505
KINGSGATE CONS. 0.733*** 0.930*** 0.141 0.116 1,043
METALS X 1.280*** 0.501** -0.377 0.137 602
NEWCREST MINING 0.622*** 1.133*** 0.0989 0.293 1,043
NEWFIELD RESOURCES -0.0278 0.112 -0.512 0.006 196
NORTHERN STAR 0.887*** 0.813*** -0.775* 0.062 638
OCEANA GOLD 0.873*** 1.166*** 0.0304 0.187 455
PERSEUS MINING 1.095*** 1.258*** -0.228 0.195 598
RAMELIUS RESOURCES 0.846*** 1.084*** 0.207 0.127 675
REGIS RESOURCES 0.428** 0.835*** -0.150 0.032 1,043
RESOLUTE MINING 1.086*** 1.224*** 0.316 0.251 1,043
SARACEN MINERAL 0.798*** 0.890*** -0.420 0.033 1,043
SILVER LAKE RESOURCES 0.830*** 1.083*** 1.097** 0.276 434
ST BARBARA 0.741*** 1.259*** 0.0428 0.140 1,043
TRIBUNE RESOURCES 0.667*** 0.405* 0.121 0.039 1,043
*,** and *** denote statistical significance at the 10%, 5% and 1% level respectively.

Table 10
Estimation results for Canadian-listed companies in the weekly sample for Model 2)
Market Gold Gold + Rsquared Obs.
TSX GOLD 0.353*** 1.327*** 0.0613 0.526 949
AGNICO EAGLE MINES 0.481*** 1.387*** 0.226 0.367 1,043
ALACER GOLD 0.953*** 0.999*** -0.156 0.162 708
ALAMOS GOLD 0.956*** 0.677*** 0.841*** 0.293 681
ANGLOGOLD ASHANTI 0.488*** 1.140*** 0.274 0.308 1,043
ASANKO GOLD 0.996*** 1.109*** -0.330 0.105 767
B2GOLD 0.598*** 1.159*** -0.0540 0.213 431
BARRICK GOLD 0.322*** 1.411*** -0.124 0.437 1,043
CENTERRA GOLD 0.513*** 1.831*** -0.738* 0.219 610
CHINA GOLD 1.087*** 1.362*** -0.0168 0.173 776
MINAS BUENAVENTURA 0.592*** 1.343*** -0.0275 0.354 1,034
DETOUR GOLD 0.825*** 1.992*** -0.539 0.358 475
ELDORADO GOLD 0.650*** 1.425*** 0.511* 0.265 1,043
ENDEAVOUR MINING 0.796*** 0.801*** 0.149 0.157 1,043
FRANCO NEVADA 0.457*** 1.017*** 0.0953 0.435 431
GOLDCORP 0.391*** 1.480*** 0.0429 0.412 1,043
GOLD FIELDS 0.323*** 1.425*** 0.364* 0.346 1,043
GUYANA GOLDFIELDS 0.682** 1.549*** 0.423 0.067 805
IAMGOLD 0.477*** 1.434*** 0.269 0.307 1,043
KINROSS GOLD 0.402*** 1.445*** 0.331 0.336 1,043
KIRKLAND LAKE GOLD 0.772*** 1.139*** 0.147 0.132 1,043
KLONDEX MINES 0.685*** 0.201 0.547 0.022 1,043
NEW GOLD 0.643*** 0.729*** 0.708* 0.103 1,043
NEWMONT MINING 0.493*** 1.126*** 0.216 0.376 1,043
NOVAGOLD RESOURCES 0.427*** 1.352*** 0.152 0.099 1,043
OCEANA GOLD 0.866*** 1.130*** 0.591 0.249 454
PREMIER GOLD MINES 0.854*** 1.481*** -0.243 0.316 498
PRETIUM RESOURCES 0.531** 1.561*** 0.120 0.214 272
PRIMERO MINING 0.659*** 0.945** -0.753 0.040 399
RANDGOLD RESOURCES 0.579*** 1.175*** 0.310 0.434 713
ROYAL GOLD 0.319*** 1.378*** 0.154 0.302 1,043
SANDSTORM GOLD 0.319** 1.342*** -0.535 0.136 447
SEMAFO 0.395*** 1.368*** -0.122 0.117 1,043
SIBANYE GOLD 0.215 2.210*** -0.0264 0.317 160
TOREX GOLD RESOURCES 0.651*** 1.166*** -0.546 0.046 1,043
YAMANA GOLD 0.612*** 1.353*** 0.222 0.155 1,043
*,** and *** denote statistical significance at the 10%, 5% and 1% level respectively.

Adverse financial conditions

I have proven up to this point the relationship between the gold mining firms in my sample and
gold returns and confirmed that they exhibit an asymmetric exposure to the price of gold. At this
point, since gold mining stock is essentially equity, it would be interesting to find out how gold
mining companies are related to the price of gold during times of adverse financial conditions.

I recognize three periods of financial crisis during the timeline of my sample. The first one is
the Asian financial crisis (07/1997 – 12/1998), the second one is the Dot-com bubble (05/2000 –
10/2002) and the third is the recent subprime crisis (09/2008 – 06/2009). In order to test the
exposure of gold mining firms to the price of gold during times of adverse financial conditions I
modify Model (2), leading to the model below

𝐶
𝑅𝑖 = 𝑎𝑖 + 𝛽𝑀,𝑖 𝑅𝑀 + 𝛽𝐺,𝑖 𝑅𝐺 + 𝛽𝐺,𝑖 𝑅𝐺 𝐷𝐶 + 𝜀𝑖 (3)

where 𝑅𝑖 , 𝑅𝑀 , and 𝑅𝐺 are the returns of gold mining company i, the market return and the return
of gold respectively and 𝐷𝐶 is the dummy variable which takes the price of 1 when there is an
identified period of adverse financial conditions. The error tern is given by 𝜀𝑖 and the parameters
𝐶
to estimate are 𝑎𝑖 , 𝛽𝑀,𝑖 , 𝛽𝐺,𝑖 and 𝛽𝐺,𝑖 . Model (3) is used to test whether there is an increased
𝐶
exposure to gold during periods of financial crisis and this effect will be captured by 𝛽𝐺,𝑖 . If
𝐶
𝛽𝐺,𝑖 >0 then there is evidence that gold mining stock behaves more like a gold option and less like
equity.

Table 11 presents the estimation results for Model 3 using USD-denominated gold prices in the
weekly sample. From the coefficients it is evident that during the identified periods of adverse
financial conditions, gold mining stock returns are driven by the returns of gold. The results are
statistically significant at the 1% level for the NYSE Arca Gold BUGS Index and the TSX
Global Gold Index. While the ASX All Ordinaries Gold Index gives a positive beta (0.12), it is
not statistically significant. This is once again a result of the strong relationship between
Australian gold mining companies and the Australian equity market.

Table 11
Beta estimates for Model (3)
Market Gold Gold crisis R squared
BUGS 0.340*** 1.519*** 0.368*** 0.522
ASX 0.689*** 1.062*** 0.117 0.491
TSX 0.359*** 1.246*** 0.412*** 0.534
*,** and *** denote statistical significance at the 10%, 5% and 1% level respectively.

5. Conclusion

This research analyzed the extent on which the stock of gold mining firms is exposed to the
price of gold. The empirical results on the weekly sample of the NYSE Arca Gold BUGS Index,
the ASX All Ordinaries Gold Index and the TSX Global Gold Index for the 20-year period
examined give an average gold beta of 1.27 and an average market beta of 0.6. In the monthly
frequency the average beta coefficients rise to 1.45 and 0.78 respectively. This comes to confirm
the theory that gold mining firms are a levered investment in gold. The main driver for these
results is the BUGS Index, which exhibits a gold beta of 1.62. This result is in line with the
reasoning behind the construction of the index, since it is supposed to offer investors a “purer
play” on gold. On the other hand, firms listed in the ASX All Ordinaries Gold Index exhibit a
beta almost equal to 1, possibly a result of gold hedging and diversification. The possibility of a
reverse causality, i.e. gold mining stock affecting the price of gold, is disregarded based on
earlier research about the drivers of the price of gold.

I confirmed the theory about gold mining firms exhibiting an asymmetric exposure to gold.
This means that gold mining companies exhibit an increased exposure to rising gold prices, due
to managerial flexibility. This effect is less strong for constituents of the BUGS Index, since
those companies refrain from hedging their gold production. Finally, I prove that during periods
of adverse financial conditions, gold mining stock returns are driven by the returns of gold. This
outcome could prove useful to investors, since they can include gold mining stock in their
portfolios as an alternative to gold ETFs.
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Appendix
Table 12
Australia - weekly sample - AUD - Model (1)
Market Gold R squared Obs.
ASX GOLD 1.099*** 1.024*** 0.421 811
ALACER GOLD 0.791*** 1.954*** 0.336 265
ANGLOGOLD ASHANTI 0.749*** 0.789*** 0.154 851
BEADELL RESOURCES 1.276*** 0.756*** 0.073 441
DACIAN GOLD 1.062*** 1.182*** 0.097 173
DORAY MINERALS 1.475*** 1.198*** 0.111 317
EVOLUTION MINING 1.322*** 0.715*** 0.103 707
GOLD ROAD RESOURCES 0.682*** 0.501** 0.023 505
KINGSGATE CONS. 1.059*** 0.862*** 0.092 1,043
METALS X 1.366*** 0.106 0.126 602
NEWCREST MINING 1.026*** 1.084*** 0.244 1,043
NEWFIELD RESOURCES -0.00801 0.113 0.002 196
NORTHERN STAR 1.068*** 0.325** 0.051 638
OCEANA GOLD 1.347*** 1.064*** 0.161 455
PERSEUS MINING 1.586*** 1.141*** 0.184 598
RAMELIUS RESOURCES 1.296*** 1.054*** 0.102 675
REGIS RESOURCES 0.702*** 0.718*** 0.027 1,043
RESOLUTE MINING 1.519*** 1.143*** 0.193 1,043
SARACEN MINERAL 1.079*** 0.746*** 0.034 1,043
SILVERLAKE RESOURCES 1.438*** 1.507*** 0.235 434
ST BARBARA 1.190*** 1.208*** 0.122 1,043
TRIBUNE RESOURCES 0.811*** 0.382*** 0.034 1,043
*** p<0.01, ** p<0.05, * p<0.1

Table 13
Canada - weekly sample - CAD – Model (1)
Market Gold R squared Obs.
TSX GOLD 0.0750*** 0.415*** 0.846 949
AGNICO EAGLE MINES 0.00176 0.566*** 0.872 1,043
ALACER GOLD 0.766*** 0.257*** 0.172 708
ALAMOS GOLD 0.679*** 0.312*** 0.312 681
ANGLOGOLD ASHANTI 0.210*** 0.379*** 0.467 1,043
ASANKO GOLD 0.851*** 0.242*** 0.106 767
B2GOLD 0.441*** 0.269*** 0.199 431
BARRICK GOLD -0.00176 0.434*** 0.801 1,043
CENTERRA GOLD 0.202 0.431*** 0.247 610
CHINA GOLD 0.919*** 0.300*** 0.152 776
MINAS BUENAVENTURA 0.404*** 0.324*** 0.389 1,034
DETOUR GOLD 0.484*** 0.488*** 0.418 475
ELDORADO GOLD 0.319*** 0.467*** 0.359 1,043
ENDEAVOUR MINING 0.681*** 0.201*** 0.157 1,043
FRANCO NEVADA 0.255*** 0.290*** 0.497 431
GOLDCORP 0.0983* 0.426*** 0.598 1,043
GOLD FIELDS 0.0645 0.405*** 0.409 1,043
GUYANA GOLDFIELDS 0.522* 0.365*** 0.052 805
IAMGOLD 0.178** 0.434*** 0.422 1,043
KINROSS GOLD 0.0416 0.485*** 0.545 1,043
KIRKLAND LAKE GOLD 0.585*** 0.302*** 0.147 1,043
KLONDEX MINES 0.649*** 0.0764* 0.018 1,043
NEW GOLD 0.496*** 0.238*** 0.095 1,043
NEWMONT MINING 0.197*** 0.388*** 0.626 1,043
NOVAGOLD RESOURCES 0.239 0.332*** 0.102 1,043
OCEANA GOLD 0.603*** 0.361*** 0.252 454
PREMIER GOLD MINES 0.628*** 0.353*** 0.324 498
PRETIUM RESOURCES 0.409 0.324*** 0.171 272
PRIMERO MINING 0.481* 0.228*** 0.057 399
RANDGOLD RESOURCES 0.249*** 0.378*** 0.509 713
ROYAL GOLD 0.0738 0.380*** 0.381 1,043
SANDSTORM GOLD 0.181 0.254*** 0.119 447
SEMAFO 0.217* 0.315*** 0.128 1,043
SIBANYE GOLD -0.0675 0.457*** 0.326 160
TOREX GOLD RESOURCES 0.624*** 0.155*** 0.035 1,043
YAMANA GOLD 0.356*** 0.387*** 0.193 1,043
*,** and *** denote statistical significance at the 10%, 5% and 1% level respectively.

Table 14
US - monthly sample - USD - Model (1)
Market Gold R squared Obs.
NYSE ARCA BUGS INDEX 0.462*** 1.707*** 0.581 228
BARRICK GOLD 0.451*** 1.613*** 0.539 240
AGNICO EAGLE MINES 0.340** 1.665*** 0.383 240
ALAMOS GOLD 0.745*** 1.413*** 0.321 156
ANGLOGOLD ASHANTI 0.575*** 1.581*** 0.380 240
MINAS BUENAVENTURA 0.443*** 1.513*** 0.392 238
ELDORADO GOLD 0.995*** 1.645*** 0.416 157
GOLDCORP 0.419*** 1.798*** 0.498 240
GOLD FIELDS 0.0250 1.876*** 0.453 240
RANDGOLD 0.538*** 1.707*** 0.511 164
HARMONY GOLD 0.00423 2.003*** 0.369 240
KINROSS GOLD 0.272 2.010*** 0.410 240
NEWMONT MINING 0.453*** 1.412*** 0.416 240
NEW GOLD 1.279*** 1.853*** 0.473 135
SIBANYE GOLD -0.709 2.952*** 0.477 37
YAMANA GOLD 0.995*** 1.953*** 0.479 150
*,** and *** denote statistical significance at the 10%, 5% and 1% level respectively.

Table 15
Australia - monthly sample - USD - Model (1)
Market Gold R squared Obs.
ASX GOLD 0.650*** 1.355*** 0.630 186
ALACER GOLD -0.0553 1.466*** 0.289 61
ANGLOGOLD ASHANTI 0.465*** 1.306*** 0.379 195
BEADELL RESOURCES 1.563*** 1.138*** 0.140 101
DACIAN GOLD 0.791 1.383* 0.122 40
DORAY MINERALS 0.679 1.923*** 0.183 73
EVOLUTION MINING 0.684** 0.922*** 0.134 162
GOLD ROAD RESOURCES 1.745*** 0.767** 0.156 116
KINGSGATE CONS. 0.860*** 0.943*** 0.120 240
METALS X 1.802*** 0.683*** 0.243 138
NEWCREST MINING 0.620*** 1.461*** 0.408 240
NEWFIELD RESOURCES 0.415 0.0543 0.022 45
NORTHERN STAR 1.243*** 0.736** 0.113 146
OCEANA GOLD 0.645* 1.441*** 0.204 104
PERSEUS MINING 1.758*** 1.326*** 0.348 137
RAMELIUS RESOURCES 1.150*** 1.010*** 0.124 155
REGIS RESOURCES 0.736* 0.652** 0.032 240
RESOLUTE MINING 1.136*** 1.721*** 0.334 240
SARACEN MINERAL 1.166*** 1.631*** 0.123 240
SILVERLAKE RESOURCES 1.153*** 1.729*** 0.305 100
ST BARBARA 0.624** 1.578*** 0.172 240
TRIBUNE RESOURCES 0.531** 0.461** 0.041 240
*** p<0.01, ** p<0.05, * p<0.1

Table 16
Australia - monthly sample - AUD - Model (1)
Market Gold R squared Obs.
ASX GOLD 0.983*** 1.195*** 0.468 186
ALACER GOLD 0.300 1.681*** 0.326 61
ANGLOGOLD ASHANTI 0.826*** 1.346*** 0.371 195
BEADELL RESOURCES 1.741*** 0.744 0.098 101
DACIAN GOLD 1.014 0.717 0.055 40
DORAY MINERALS 1.216* 1.657*** 0.126 73
EVOLUTION MINING 0.933*** 0.850*** 0.110 162
GOLD ROAD RESOURCES 1.853*** 0.388 0.130 116
KINGSGATE CONS. 1.027*** 0.601*** 0.073 240
METALS X 1.899*** 0.198 0.202 138
NEWCREST MINING 0.920*** 1.142*** 0.250 240
NEWFIELD RESOURCES 0.397 0.321 0.039 45
NORTHERN STAR 1.352*** 0.224 0.077 146
OCEANA GOLD 1.043*** 1.313*** 0.146 104
PERSEUS MINING 2.057*** 0.884*** 0.253 137
RAMELIUS RESOURCES 1.450*** 1.001*** 0.115 155
REGIS RESOURCES 0.888** 0.600* 0.028 240
RESOLUTE MINING 1.435*** 1.064*** 0.170 240
SARACEN MINERAL 1.537*** 1.456*** 0.099 240
SILVERLAKE RESOURCES 1.534*** 1.422*** 0.194 100
ST BARBARA 1.042*** 1.702*** 0.182 240
TRIBUNE RESOURCES 0.657** 0.517** 0.044 240
*** p<0.01, ** p<0.05, * p<0.1
Table 17
Canada - monthly sample - USD - Model (1)
R
Market Gold squared Obs.
TSX GOLD 0.314*** 1.428*** 0.577 218
AGNICO EAGLE MINES 0.398*** 1.487*** 0.361 240
ALACER GOLD 0.883*** 1.069*** 0.212 163
ALAMOS GOLD 0.718*** 1.064*** 0.259 156
ANGLOGOLD ASHANTI 0.786*** 1.458*** 0.421 240
ASANKO GOLD 1.289*** 1.174*** 0.133 176
B2GOLD 1.417*** 1.716*** 0.426 99
BARRICK GOLD 0.293*** 1.441*** 0.518 240
CENTERRA GOLD 1.075*** 1.839*** 0.283 140
CHINA GOLD 1.337*** 1.509*** 0.239 178
MINAS BUENAVENTURA 0.601*** 1.418*** 0.419 238
DETOUR GOLD 1.482*** 1.849*** 0.478 109
ELDORADO GOLD 0.861*** 1.868*** 0.331 240
ENDEAVOUR MINING 0.990*** 1.067*** 0.233 240
FRANCO NEVADA 0.347** 1.261*** 0.571 99
GOLDCORP 0.348*** 1.619*** 0.479 240
GOLD FIELDS 0.338** 1.849*** 0.466 240
GUYANA GOLDFIELDS 1.011*** 2.117*** 0.256 185
IAMGOLD 0.538*** 1.467*** 0.305 240
KINROSS GOLD 0.252 1.855*** 0.400 240
KIRKLAND LAKE GOLD 0.652*** 1.738*** 0.232 240
KLONDEX MINES 0.707** 0.596* 0.036 240
NEW GOLD 1.010*** 1.276*** 0.191 240
NEWMONT MINING 0.573*** 1.319*** 0.442 240
NOVAGOLD RESOURCES 0.762*** 1.536*** 0.152 240
OCEANA GOLD 1.374*** 1.517*** 0.311 104
PREMIER GOLD MINES 1.123*** 1.536*** 0.360 114
PRETIUM RESOURCES 0.386 1.187** 0.113 62
PRIMERO MINING 0.970* 0.623 0.049 91
RANDGOLD RESOURCES 0.638*** 1.613*** 0.522 164
ROYAL GOLD 0.504*** 1.368*** 0.311 240
SANDSTORM GOLD 1.398*** 0.562** 0.187 103
SEMAFO 0.826*** 1.767*** 0.241 240
SIBANYE GOLD 0.383 2.894*** 0.469 37
TOREX GOLD RESOURCES 1.489*** 1.003*** 0.143 240
YAMANA GOLD 0.887*** 1.706*** 0.278 240
*,** and *** denote statistical significance at the 10%, 5% and 1% level respectively.
Table 18
Canada - monthly sample - CAD - Model (1)
R
Market Gold squared Obs.
TSX GOLD 0.582*** 1.424*** 0.534 218
AGNICO EAGLE MINES 0.685*** 1.535*** 0.357 240
ALACER GOLD 1.180*** 1.104*** 0.206 163
ALAMOS GOLD 0.994*** 0.917*** 0.196 156
ANGLOGOLD ASHANTI 1.055*** 1.396*** 0.374 240
ASANKO GOLD 1.563*** 1.029*** 0.111 176
B2GOLD 1.870*** 1.658*** 0.367 99
BARRICK GOLD 0.566*** 1.441*** 0.483 240
CENTERRA GOLD 1.556*** 1.703*** 0.232 140
CHINA GOLD 1.690*** 1.338*** 0.196 178
MINAS BUENAVENTURA 0.848*** 1.216*** 0.310 238
DETOUR GOLD 2.053*** 1.956*** 0.462 109
ELDORADO GOLD 1.213*** 1.864*** 0.311 240
ENDEAVOUR MINING 1.183*** 0.984*** 0.207 240
FRANCO NEVADA 0.721*** 1.361*** 0.568 99
GOLDCORP 0.654*** 1.619*** 0.446 240
GOLD FIELDS 0.680*** 1.781*** 0.405 240
GUYANA GOLDFIELDS 1.512*** 2.063*** 0.225 185
IAMGOLD 0.817*** 1.489*** 0.294 240
KINROSS GOLD 0.590*** 1.742*** 0.330 240
KIRKLAND LAKE GOLD 0.969*** 1.632*** 0.196 240
KLONDEX MINES 0.782** 0.246 0.024 240
NEW GOLD 1.243*** 1.201*** 0.171 240
NEWMONT MINING 0.812*** 1.226*** 0.371 240
NOVAGOLD RESOURCES 1.054*** 1.553*** 0.146 240
OCEANA GOLD 1.835*** 1.635*** 0.306 104
PREMIER GOLD MINES 1.584*** 1.620*** 0.348 114
PRETIUM RESOURCES 0.671 1.041* 0.090 62
PRIMERO MINING 1.134* 0.526 0.045 91
RANDGOLD RESOURCES 1.070*** 1.550*** 0.446 164
ROYAL GOLD 0.763*** 1.371*** 0.293 240
SANDSTORM GOLD 1.555*** 0.555* 0.181 103
SEMAFO 1.164*** 1.804*** 0.235 240
SIBANYE GOLD 0.934 2.854*** 0.432 37
TOREX GOLD RESOURCES 1.672*** 0.945*** 0.136 240
YAMANA GOLD 1.203*** 1.647*** 0.250 240
*,** and *** denote statistical significance at the 10%, 5% and 1% level respectively.