What happened

Precious metal stocks sizzled on Thursday, with most gold and silver stocks jumping double-digit percentages by midday. Here’s how much the top-performing stocks from the industry had rallied at their highest points in trading during the day through 2 p.m. ET:

• Endeavour Silver (EXK 15.91%): up 15%
• Coeur Mining (CDE 10.36%): up 11.9%
• First Majestic Silver (AG 10.45%): up 10.9%
• Hecla Mining (HL 9.11%): up 9.5%

A rebound in the broader markets and precious metal prices ahead of key economic data fueled the rally in these stocks.

So what

Most gold and silver stocks were hit earlier in the week after a sharp pullback in commodity prices. On Thursday, though, the gold price shot up and crossed $1,870 per ounce, a level not seen in more than three weeks.

Silver had a similar story to tell, with prices of the grey metal topping $22 per ounce, bouncing off lows after plunging to nearly $20 an ounce in the second week of May.

In fact, both gold and silver prices corrected sharply in mid-April, which is why Thursday’s rally had such a huge impact on the stocks from the industry.

Image source: Getty Images.

Multiple factors appear to be helping gold and silver prices rebound. Lingering concerns about high inflation and a slowdown in the economy are urging investors to flock from equities and high-risk stocks into safe-haven assets like gold and silver. At a conference on Wednesday, JPMorgan Chase CEO Jamie Dimon even urged investors to brace for an “economic hurricane” triggered by the Russia-Ukraine war, inflationary pressures, and interest rate hikes. Such warnings can be scary, and often spur interest in safe-haven assets.

Meanwhile, data from payroll processing company Automatic Data Processing released on Thursday revealed a slowdown in hiring, with the private sector adding only 128,000 jobs in May. That’s significantly below Wall Street’s estimates as well as April numbers. Jobs data is a key barometer of the health of the economy and can therefore influence investor sentiment about assets like gold and silver that are considered a hedge against inflation and economic uncertainty. 

Now what

The profitability for gold and silver miners is directly correlated to metal prices. Of course, higher prices have to sustain for longer periods of time to flow through miners’ bottom lines, but the market is often quick to bid shares higher every time gold and silver rally in anticipation that it’ll especially help miners that are boosting production. 

From that standpoint, First Majestic Silver could be a beneficiary as it expects silver production to grow almost 30% in 2022 thanks to its acquisition of the Jerritt Canyon mine in Nevada last year. Although the company remains focused on silver, Jerritt Canyon helps it diversify into the world-class mining region, Nevada.

In contrast, Endeavour Silver — another silver pure play — expects lower silver production this year as it shut a mine recently. However, the company expects to acquire a mine soon as well as advance a project in Mexico. Coeur Mining, a diversified precious metals company, also expects low-to-flat gold production this year.

HL data by YCharts

Hecla Mining, the largest silver producer in the U.S., which mines almost 40% of all silver produced in the nation, even has a silver price-linked dividend policy — it pays a fixed quarterly dividend of $0.00375 per share plus a price-linked dividend above silver price of $20 per ounce. Here’s how it works: If the miner’s average realized silver price in a quarter falls between $20-$25 per ounce, you can expect an extra quarterly dividend of $0.0025 per share. That may not be much, but any passive income during times of uncertainty is welcome.

With each of these stocks also falling precipitously since mid-April alongside gold and silver prices, expect any further uptick in metal prices in the coming days to drive them higher.