The stock market returned to its mixed ways on Thursday, showing the ongoing efforts from investors to try to identify certain segments of the economy that are likely to do better than others. Unemployment claims fell below the 1 million mark this past week, marking another milestone toward hopefully returning to more normal economic conditions. Just before 11 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 67 points to 27,910. However, the S&P 500 (SNPINDEX:^GSPC) rose 2 points to 3,382, and the Nasdaq Composite (NASDAQINDEX:^IXIC) climbed 88 points to 11,100.
The precious metals markets have been particularly tumultuous this week, with gold prices in particular having soared to record levels before falling back in dramatic fashion. On Thursday morning, gold and silver posted solid rebounds. The moves have some investors wondering whether trends in the economy could support a longer-term rise for precious metals and the stocks that benefit when prices go up.
Precious metals markets opened higher Thursday morning, continuing to rebound from declines earlier in the week. Gold prices jumped $28 per ounce to $1,942 shortly before 11 a.m. EDT, while silver prices were higher by $1.15 per ounce to $26.60. Platinum-group metals also followed gold and silver higher, as platinum gained $27 per ounce to $948 and palladium climbed $35 per ounce to $2,043.
The day's moves marked a welcome but small recovery from the sharp decline seen two days ago. Tuesday brought a $118-per-ounce decline in the price of gold, and silver was down more than $4 per ounce. Those were historic drops in percentage terms, and they came after gold had hit record levels and silver had risen to its highest price in years.
In response, stocks related to the gold and gold mining industries perked up. ETFs SPDR Gold (NYSEMKT:GLD) and iShares Silver (NYSEMKT:SLV) saw percentage gains of 2% and 6%, respectively, in line with the rise in bullion prices. The VanEck Vectors Gold Miners ETF (NYSEMKT:GDX) was higher by about 4%, with key mining stocks like Newmont (NYSE:NEM) and Barrick Gold (NYSE:GOLD) seeing gains of 2% and 3%, respectively. Precious metals streaming specialist Wheaton Precious Metals (NYSE:WPM) weighed in with a 4% advance.
What's next for gold and silver?
The rise in interest in gold and silver has come from several corners. Many are skeptical about the latest efforts from the U.S. government to stimulate economic growth through massive spending, citing potential impacts like inflation as being likely. The consumer price index rose 0.7% in June and 0.6% in July, providing some evidence for worries about inflation perking up once again.
Meanwhile, interest rates remain at rock-bottom levels. That's largely because of intervention from the Federal Reserve and other central banks across the world, but the low-cost borrowing environment makes it far easier for commodity investors to finance their positions and make speculative bets on precious metals. The result has been greater volatility than normal, but the overall trend has generally pointed up.
Bullish gold investors believe that the violent downward move on Tuesday was merely a correction after an impressive climb in recent weeks. They believe that gold can easily move back above $2,000 and set new record highs, with some ambitious investors looking at price targets like $2,500 and $3,000 in the near future.
In the end, a lot will depend on what happens with the stock market and with future stimulus packages. If the economy recovers, then gold and silver could fall back. However, if a new wave of stock market declines happens, then precious metals could rise again on the resulting uncertainty in financial markets.