What happened

Gold and silver stocks tanked on Thursday, with nearly every publicly listed stock from the sector trading deep in the red as the day progressed. Here's how some of the top precious metals stocks were faring as of 1 p.m. ET (some of these had fallen much harder in early morning trading):

  • Kinross Gold (KGC 3.99%): down 7.9%
  • Hecla Mining (HL 0.57%): down 7.2%.
  • First Majestic Silver (AG -0.59%): down 5.5%.
  • Sibanye Stillwater (SBSW -3.76%): down 11.9%.
  • Coeur Mining (CDE 1.35%): down 7.7%.

While most macroeconomic factors seemed to go against the precious metals market today, there's a chance gold and silver stocks could rebound.

So what

Silver prices tumbled below $19 an ounce on Thursday to levels last seen two and a half years ago. Gold prices, meanwhile, slipped below $1,700 per ounce to 11-month lows. An uncertain macroeconomic environment is to blame.

Since the prices of gold and silver are denominated in U.S. dollars, the metals become expensive for buyers from outside the U.S. when the dollar appreciates against other currencies. That hurts demand for precious metals and sends gold and silver prices lower. This morning, the U.S. dollar index, which measures the value of the greenback relative to six major currencies, hit 20-year highs.

Also, with crude oil prices falling as well and the entire commodity sector coming under pressure, the ripple effect could be felt in the precious metals market today. As gold and silver prices tumbled, stocks from the sector were bound to come under selling pressure as investors anticipate lower profitability and dividends from miners in a falling price environment.

Hecla Mining, for example, has a hybrid dividend policy. It pays a fixed quarterly dividend of $0.00375 per share plus a variable dividend above silver prices of $20 per ounce. In its first quarter, for example, Hecla realized a price of $24.68 per ounce of silver and paid a variable dividend of $0.0025 per share.

To give you another example, First Majestic pays a quarterly dividend per share equal to 1% of the company's net quarterly revenue per share. Since revenue is directly correlated to silver prices, the company's dividends could fall alongside silver prices if its sales volumes fall, too.

Now what

Today's sell-off may not last long, though, particularly for gold stocks. Here's the big reason why: The latest inflation number came in higher than expected on Thursday, with the Consumer Price Index rising 9.1% year over year in June versus estimates of 8.8%.

In short, inflation continues to rage, and it's now even more likely that the Federal Reserve will once again announce a big interest rate hike in the coming weeks. The faster and higher the interest rates rise, the greater the chances of a recession in the U.S.

Any slowdown in the economy is bad news for the stock markets but bodes well for precious metals as they're considered safe haven assets during inflationary and uncertain times. Demand for metals -- and their prices, therefore -- typically rises during these times. Gold prices could rise higher than silver prices, though, as silver is primarily an industrial metal that's used widely in the manufacturing sector. Since manufacturing activity falls during a slowdown, demand for silver could fall as well. 

The uncertain macro environment still looks conducive to drive gold and silver stocks higher in the near term.