The stock market got off to a good start on Monday morning, with only the Dow Jones Industrial Average (DJINDICES:^DJI) holding back investors from celebrating solid gains toward record highs. Both the S&P 500 (SNPINDEX:^GSPC) and the Nasdaq Composite (NASDAQINDEX:^IXIC) flirted with unprecedented levels. Just after 11 a.m. EDT, the Dow was down 38 points to 27,893, but the S&P 500 climbed 11 points to 3,384, and the Nasdaq was up 75 points to 11,094.
The big gains for the day came from the gold market, where a recent run to all-time highs for the yellow metal has spurred greater interest. Over the weekend, it became evident that the gold mining sector is becoming a target even for value investors who might typically have avoided the industry entirely. That got market participants even more excited about gold stocks, whose shares climbed sharply Monday morning.
The Buffett seal of approval?
Gains for gold stocks were widespread. Leading the way was Barrick Gold (NYSE:GOLD), which gained more than 11%. However, other big mining stocks fared well, including Newmont (NYSE:NEM) and its 5% gain. The Van Eck Vectors Gold Miners ETF (NYSEMKT:GDX) posted a nearly 6% gain.
Barrick Gold's surge stemmed from its disclosure as a new holding of Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), with the insurance giant adding the position at some point during the second quarter. Buffett has been an outspoken critic of investing in gold bullion, so the decision took many by surprise. However, Barrick's low earnings multiple and rising dividend likely made the mining stock attractive.
The extent to which that translates beyond Barrick remains uncertain. Newmont's earnings multiple is somewhat higher, but it shares the same leadership status in the industry. Smaller miners, however, are much more speculative in nature, without the same set of high-quality assets that investors can rely on to generate ample production year in and year out.
A longer bull market for gold?
Gold bullion also rose Monday morning, climbing $33 per ounce to $1,978. The yellow metal had already done quite well even before Buffett's latest revelations, pushing well above the $2,000 per ounce mark before falling back in a violent correction last week.
Investors are nervous about economic conditions related to the COVID-19 pandemic. Governments across the globe are taking unprecedented measures to help their populations in the face of massive disruptions, and central banks are using every monetary policy tool they have to lend further support. Inflation has perked up in the past couple of months, and that's heightened fears that undisciplined government entities could cause instability in stocks, bonds, and currencies in the long run. Many see gold as a safe haven.
The carryover effect was evident even outside the mining space. Precious metals streaming companies Franco-Nevada (NYSE:FNV), Royal Gold (NASDAQ:RGLD), and Wheaton Precious Metals (NYSE:WPM) were all up 3% to 4% on the day, as they stand to benefit from healthier prices for gold as well. The silver market also celebrated, with iShares Silver Trust (NYSEMKT:SLV) jumping almost 4%.
Buffett's investment in Barrick isn't a huge one, but it has focused attention on a market that was already doing well. Gold investors will appreciate the new interest, and favorable conditions could keep the yellow metal and the mining companies that rely on it moving higher.