What happened

Shares of Endeavour Silver (NYSE:EXK) fell as much as 12% in the first 90 minutes of trading on Jan. 8. Silvercorp Metals (NYSEMKT:SVM), Coeur Mining (NYSE:CDE), and Hecla Mining (NYSE:HL) all dropped roughly 10%. At about 11:30 a.m. EST, all four of these precious metals miners were still clinging to material losses. There's a simple answer for the declines here and a more complicated one.

So what

Miners Endeavour, Silvercorp, Coeur, and Hecla all share one common trait: They have a relatively heavy exposure to silver. That, from a top level, helps to explain the share price declines here, given that silver declined sharply in early trading today. Gold fell, too, but silver prices tend to be more volatile, and that was once again on display with silver dropping notably more than gold. So, it makes complete sense that this quartet of silver-heavy miners would be falling out of favor with investors.  

A gloved hand holding a silver bar

Image source: Getty Images.

However, there's a bit more to think about here if you are looking at the precious metals space. For example, gold and silver are often looked at as safe haven assets. Basically, investors flock to them when times are tense. That's part of the reason why both of the metals have rallied so strongly over the past year or so, since dropping along with the market during the early 2020 bear market. Silver, it should be noted, experienced the more significant price swings. But market sentiment is shifting in some important ways.   

For example, bad news is good news right now as relatively weak employment numbers coupled with a new administration getting ready to take the reins in Washington, D.C., has investors upbeat. The expectation appears to be that additional stimulus will be put into play, whichwill help keep the U.S. economy strong. Thus, there's reduced need for safe haven assets.

Meanwhile, bond yields have inched higher of late. Bonds and precious metals generally compete for the safe haven asset role. Bonds often get the nod because they generate income, while gold and silver do not. With bond yields scraping near painful lows in recent years, however, some investors preferred gold and silver. But as bond yields rise, the opportunity loss from holding precious metals (not collecting interest income) also rises. Again, silver and gold lose out.

New in this story is the role of digital currencies like bitcoin. This particular option has recently been on a massive price run, hitting all-time highs. Investors are increasingly looking to digital currencies as an alternative to older safe haven asset choices. And with the price of bitcoin in the news lately for decidedly upbeat reasons, it wouldn't be shocking to think that investors in gold and silver would switch alliances.

EXK Chart

EXK data by YCharts

It is hard for precious metals and precious metals mining stocks to overcome big-picture shifts like these. In fact, Endeavour Silver, which reported strong production results on Jan. 7, saw three Wall Street analysts increase their price targets for the stock today. That would normally put investors in a bullish mood, but with the dynamics noted above shifting at the same time, that didn't happen this time around.  

Now what

Long-term investors probably shouldn't try to time the ups and downs of silver and gold. It is a far better idea to look at these metals, and the companies that mine for them, like Endeavour, Silvercorp, Coeur, and Hecla, as diversifying assets. That said, after such a long string of upside success for precious metals and the headwinds that are starting to attract investors' attention, those seeking safe haven assets might want to err on the side of caution and stick with cash for the moment. Gold and silver are already volatile, but after huge gains following the 2020 bear market, even more pronounced ups and downs could be the norm for now given the big-picture changes taking shape in the world.

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.