The stock market's first trading day of 2021 was just as muted as many people's socially distanced New Year's parties, and for much the same reasons. Market participants were nervous about the potential that the COVID-19 pandemic might linger far further into 2021 than originally hoped, especially given the slow pace of rolling out vaccines to fight the coronavirus.

By the end of the session, stocks were off their lows, but the Dow Jones Industrial Average (DJINDICES:^DJI), S&P 500 (SNPINDEX:^GSPC), and Nasdaq Composite (NASDAQINDEX:^IXIC) were all down between 1% and 1.5% on the day.

Index

Percentage Change (Decline)

Point Change

Dow

(1.25%)

(383)

S&P 500

(1.48%)

(55)

Nasdaq Composite

(1.47%)

(190)

Data source: Yahoo! Finance.

The decline had many people worried that the worst might be yet to come. After a strong performance in 2020, it's natural for investors to worry about a correction to start the new year.

Yet one part of the market was able to put those fears to rest. Gold stocks didn't just hold up better than the overall market -- they posted huge gains. Let's look at the biggest winners in the space and why things are looking up for gold miners in 2021.

People clinking champagne glasses.

Image source: Getty Images.

All that glittered on the first trading day of 2021

As is often the case, rising gold stocks got their cue from the commodities markets. Gold prices were higher by more than $40 per ounce, climbing to $1,942 by the close. Silver prices saw even bigger gains on a percentage basis, with an $0.84 per ounce gain to $27.21. Platinum saw similarly large advances early in the session, although the precious metal gave up ground and settled for just a $4 rise by the close to $1,064 per ounce.

The prospects for strong bullion prices in 2021 helped boost gold mining stocks. The VanEck Vectors Gold Miners ETF (NYSEMKT:GDX) picked up almost 7% on Monday. The VanEck Vectors Junior Gold Miners ETF (NYSEMKT:GDXJ), which concentrates on smaller mining companies, managed to climb by more than 7% on the day.

Several individual miners did far better. Industry giant Barrick Gold (NYSE:GOLD) and streaming specialist Wheaton Precious Metals (NYSE:WPM) were both up 8%, while South Africa's Gold Fields (NYSE:GFI) and AngloGold Ashanti (NYSE:AU) climbed 13% each.

Why gold could keep shining

The thing investors need to remember about gold mining stocks is that a host of factors are working in their favor right now. Consider:

  • The Federal Reserve has pushed interest rates to rock-bottom levels and has essentially pledged to keep them low indefinitely. Interest rates are negative in many countries across the globe. That makes the opportunity cost of owning gold much lower, encouraging investment.
  • Gains in gold prices in recent years have made mining operations profitable again. That's making growth possible, and miners are investing in their own expansion opportunities.
  • Wealthy investors have seen big gains in the stock market generally, and they're looking for places to squirrel away profits in areas that aren't likely to fall back. Gold has historically been a solid store of value for the rich, with advantages over alternatives like cryptocurrencies.

These conditions are likely to persist for the foreseeable future. As long as they do, precious metals will have a friendly environment that's likely to support their prices.

Good luck in the new year!

Of course, gold stocks are just as risky as any stock market investment, and there aren't any guarantees that today's gains will grow over the course of the year. But the way things look now, the prospects for gold stocks are attractive, and many smart investors are taking a closer look at miners for 2021.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.