What happened

Gold stocks were on the march today, riding a broad relief rally as stock prices rose and Treasury yields crashed with the yield on the 10-Year Treasury Note down 5.6% in afternoon trading. Asset prices climbed across the board.

Bond prices rise when yields drop, while stocks, cryptocurrencies, commodities including oil, and precious metals like gold were all higher.

There was no obvious trigger for the movement, though the most likely reason seems to be the Bank of England's decision to buy long-dated U.K. government bonds in order to stabilize the pound after the currency had fallen sharply against the dollar in recent weeks.

Gold is seen by some investors as a safe haven from money-printing in fiat currencies, especially during high-inflation times, while others believe that higher interest rates are bearish for gold because they make fixed income like bonds more attractive.

Gold prices are down this year, in spite of high inflation and the economic upheaval from the war in Ukraine, but the precious metal seemed to respond positively to the Bank of England's intervention, which also cooled off the strengthening U.S. dollar. The dollar index was down more than 1% in the afternoon, which is also bullish for gold as gold is priced in dollars.

As of 4:18 p.m. ET, spot gold prices were up 2%, sending gold miners soaring. Among the winners were Equinox Gold (EQX 0.97%), which closed up 16%, Eldorado Gold (EGO 1.15%), which gained 13.4%, and New Gold (NGD), which was up 13.5%.

So what

All gold miners are sensitive to gold prices, but these three companies, all of which are small-cap stocks, are especially sensitive. All three stocks are down more than 50% from their highs this year even after today's gains. Gold prices crashed in the spring amid rising interest rates, high inflation, and fears of a recession.

Equinox, for example, said in its second-quarter earnings report that its all-in sustaining costs (AISC) for mining gold were $1,657 per ounce. With gold prices falling below that mark earlier this week, hitting a low of $1,622.20 per ounce this morning, Equinox's operations were effectively underwater -- it loses money selling gold at that price. However, spot gold prices rebounded to $1,670 in afternoon trading, putting those fears to rest for now.

Equinox had an adjusted loss of $47.9 million, or $0.26 per share, in the second quarter when it realized an average sale price of $1,856 per ounce, so it's likely to report a wider loss in the third quarter as gold prices have fallen. 

Eldorado finds itself in a better position than Equinox with an AISC of $1,270 per ounce in its second quarter, however, the company said it ran into production challenges in the first quarter, which caused it to lower its production guidance for the year and raise its AISC from $1,180 to $1,280. Eldorado did post an adjusted profit in the second quarter of $13.8 million, though investors should keep an eye on production challenges, especially as supply chain issues remain a threat in the industry.

Finally, New Gold shares have drifted into penny stock range, trading for less than $1, and the company's latest earnings report makes it clear why. In its second quarter, the company's all-in sustaining costs were $2,373 per ounce due in part to higher fuel costs, making production unsustainable at that level. New Gold posted an adjusted loss of $16.7 million on revenue of $115.7 million in the quarter. The company also cut its production guidance and raised AISC guidance for the year to between $1,875 and $1,975. Despite that high cost, New Gold's AISC should be below the spot price of gold under less inflationary, more normal operating conditions.

Now what

Gold prices have proven difficult to predict this year as global inflation, rising interest rates, and the war in Ukraine have disrupted the global economy and sent the price of risk assets falling. Meanwhile, the strengthening dollar has pressured gold prices.

While gold is supposed to be a safe haven during a time of economic upheaval, that doesn't always prove to be true. The price could recover if treasury yields continue to pull back, but volatility is likely to continue for gold prices and these three gold stocks.