Gold, Silver Outshine Stock Markets Despite Dow Hitting 27,000

Wednesday was another positive day on Wall Street, as major benchmarks gained ground in nearly every segment of the market. Even with some new tensions between the U.S. and China, investors seemed to keep their eyes on improving hopes for global economic growth. The Dow Jones Industrial Average (^DJI -0.77%) and S&P 500 (^GSPC -1.11%) led the way higher, with the Nasdaq Composite posting more modest gains.

Today's stock market

Data source: Yahoo! Finance.

Yet as impressive as the recent streak in stocks has been, the commodities markets have enjoyed an even bigger rise in interest lately. In particular, precious metals markets were on fire on Wednesday, with big gains across the board that reflect sentiment about the massive amounts of monetary stimulus that global central banks are throwing into the financial markets.

Precious metals were big winners

Across the sector, precious metals had strong gains. Gold climbed by $27 per ounce to $1,868, which is within shouting distance of all-time record levels. In some local currencies around the world, gold has already eclipsed its former highs from the early 2010s.

Image source: Getty Images.

Gains in other metals were even more exciting. Silver jumped $1.65 per ounce, nearing the $23 mark. Platinum rose $39 per ounce to $915, reflecting industrial demand. On a percentage basis, palladium brought up the rear, but even there, gains of $22 per ounce to $2,074 had investors excited about the future.

ETFs that track those prices rose nearly in lockstep. SPDR Gold (GLD -0.69%) was up 1.5% on the day, while iShares Silver (SLV -1.40%) soared 9%. Aberdeen Standard Physical Platinum (PPLT -1.90%) picked up 5% on the day, with Aberdeen Standard Physical Palladium (PALL -1.33%) settling for a gain of 1.6%.

What's happening with gold and silver?

Gold and silver have historically been hedges against uncertainty, especially in the macroeconomic and geopolitical realm. At the same time, their nature as a relatively fixed monetary base have made the two metals go-to investments for those who are concerned about the value of fiat currencies.

Central banks have aggressively fought to stimulate the global economy in the face of the COVID-19 pandemic. That's required dramatic measures, including trillions of dollars in asset purchases to try to shore up financial markets. So far, that hasn't led to any inflationary pressure. Eventually, though, some investors fear that inflation is inevitable. They hope gold and silver will do what they've sometimes done in the past and protect them against the full impact of inflation.

That said, precious metals have their negatives as investments. Long-term performance has been spotty, punctuated by substantial bear-market moves that take years to play out and erase large percentages of past gains. Moreover, with metals not producing any income, the only return investors get is from favorable market movements. That compares poorly with stocks, many of which pay dividend income that adds to total returns from capital gains.

Precious metals markets have a loyal following, and many investors there believe that this is the start of a much longer-term trend. With all the uncertainty in the markets right now, it's definitely possible that gold, silver, and the platinum-group metals could have further to run.