The Big Winner in Friday's Stock Market Swoon

Friday brought continued worries about the macroeconomic climate to Wall Street, as high levels of inflation coincided with rising geopolitical tension from Ukraine facing an imminent threat of invasion from Russia. Market sentiment seemed guarded, with investors fleeing stocks and boosting the bond market to bring 10-year Treasury yields back down below the 2% mark. By the end of the session, the Dow Jones Industrial Average (^DJI 0.69%), S&P 500 (^GSPC 1.20%), and Nasdaq Composite (^IXIC 1.59%) all suffered sizable declines.

Data source: Yahoo! Finance.

Many sectors of the stock market were lower on the day, with technology and consumer stocks suffering the biggest declines. However, investors did find some solace in an area of the market that has traditionally offered a safe haven in times of the greatest stress. Gold stocks were sharply higher.

Below, we'll look more closely at why the yellow metal did so well, which companies benefited the most, and what the move could mean for the future.

Image source: Getty Images.

A big move for gold

Commodities prices often drive the stocks of the companies that produce those commodities, and gold is no exception. Precious metals performed well on Friday, with gold rising $32 per ounce to $1,859. That was the highest level for the yellow metal in about three months, with market watchers attributing most of the new interest to fears of a Russian invasion of Ukraine.

Other precious metals were mixed. Silver was up nearly 2%, climbing $0.40 per ounce to move above $23.50. Platinum eased slightly lower to $1,023 per ounce, but palladium jumped over 2%, or nearly $60 per ounce, to $2,255. Russia is a key supplier of platinum-group metals as well as many of the base industrial metals that serve as important supplies for manufacturers around the world.

In response, shares of gold miners moved upward. Newmont (NEM 0.67%) was up 5.5%, while Barrick Gold (GOLD 1.64%) picked up more than 7% on the day. Smaller players saw even bigger gains, including Sibanye Stillwater (SBSW -2.61%) and its better than 10% gain. Sibanye has the added advantage of also having platinum-group metals in its portfolio of mining assets, giving it extra exposure beyond the gold market.

Also seeing gains were companies that don't mine gold themselves but rather provide financing to gold mining operations. Known as gold streaming stocks, these companies often act as leveraged bets on the price of gold and other metals prices. Franco-Nevada (FNV 0.93%) was up more than 5% on Friday, while peer Royal Gold (RGLD 1.34%) posted a nearly 7% advance on the session.

Will gold be a long-term winner?

Investors often like gold during times of trouble, but they often prove to be fickle when those tough times end. Some gold-market watchers warn that it's important to look beyond geopolitical news to look at the underlying fundamentals of the commodity, because if Russia and Ukraine find some favorable resolution, panic-inspired price increases will quickly reverse.

Investors in mining stocks therefore might prefer to look at more diversified companies with exposure beyond precious metals. For instance, Freeport-McMoRan (FCX -1.96%) has massive copper-mining operations as well as producing gold, and copper tends to be tied more closely to economic activity. That doesn't offer complete protection, but it does give Freeport a different risk-reward proposition than pure-play gold miners.

Gold is a compelling investment for many people, even though it produces no income and is tied to supply and demand factors within commodities markets. The right gold stock can offer dividends and growth potential as well, and that makes the industry even more compelling when gold prices are moving in the right direction.