Fool's Gold Report: Plunging Stocks Send Gold, Silver Higher Again

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Gold hasn't behaved much like a safe-haven investment over the past year, with poor performance in good stock markets and bad ones alike. But today at least, plunging stock markets gave gold a modest lift, with spot gold prices climbing $4 per ounce to $1,253. For short-term traders, the move was significant, even though the modest 0.6% gain in the SPDR Gold (NYSEMKT: GLD  ) still left the ETF only less than 6% above its recent lows. Silver did even better, climbing $0.25 per ounce to finish at $20.42 and sending iShares Silver (NYSEMKT: SLV  ) to gains of 1.5%. Platinum-group metals were mixed, with palladium falling $3 to $739 per ounce but platinum picking up $9 to $1,441.

Image sources: Wikimedia Commons; Creative Commons/Armin Kubelbeck.

Precious-metals investors pay a lot of attention to trends in the futures markets, and the latest figures as of Jan. 7 showed that large speculative traders took bullish positions in gold and engaged in significant short-covering of positions in silver and platinum. The annual rebalancing of commodity indexes might have played a role in the speculative activity, but market participants also pointed to the weak jobs report on Friday as having created further interest in precious metals.

Mining stocks jumped substantially, with Market Vectors Gold Miners (NYSEMKT: GDX  ) rising almost 3%. The potential for greater merger and acquisition activity in the gold space might well have driven interest in mining stocks, with Goldcorp (NYSE: GG  ) having made a $2.6 billion bid to buy Canada's Osisko Mining in an effort to gain access to Osisko's Malartic mining property in Quebec. With Goldcorp already expecting a 13% to 18% increase in production this year, acquisitions can only help the company cement its new position as the largest gold miner in the world by market capitalization.

Despite its strong performance, gold will inevitably face further challenges. Given the extensive declines for the metal in 2013, though, gold has plenty of room to climb before investors could even be sure of a lasting recovery for the sector.

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