Gold and silver outperform stock markets despite Dow hitting 27,000

Wednesday was another positive day on Wall Street as major benchmarks gained ground in almost every market segment. Even with some new tensions between the US and China, investors seemed to keep their eyes on improving hopes for global economic growth. the Dow Jones Industrial Average (DJINDICES: ^ DJI) and S&P 500 (SNPINDEX: ^ SPX) led the highest path, with the Nasdaq compound posting more modest earnings.

Stock market today

Data source: Yahoo! Finance.

However, as impressive as the recent stock streak has been, commodity markets have enjoyed an even bigger surge in interest lately. In particular, the precious metals markets were on fire on Wednesday, with huge gains across the board reflecting sentiment about the massive amounts of monetary stimulus that global central banks are launching into financial markets.

Precious metals were big winners

Across the industry, precious metals had strong gains. Gold rose $ 27 an ounce to $ 1,868, which is within the distance of all-time record levels. In some local currencies around the world, gold has already eclipsed its previous highs since early 2010.

Image source: Getty Images.

The gains in other metals were even more exciting. Silver rose $ 1.65 per ounce, approaching the $ 23 mark. Platinum rose $ 39 per ounce to $ 915, reflecting industrial demand. On a percentage basis, palladium brought the backside, but even there, earnings of $ 22 per ounce at $ 2,074 made investors excited about the future.

ETFs tracking those prices rose almost on par. SPDR Gold (NYSEMKT: GLD) it was up 1.5% on the day, while iShares Silver (NYSEMKT: SLV) 9% shot up. Aberdeen Standard Physical Platinum (NYSEMKT: PPLT) collected 5% on the day, with Aberdeen Standard Physical Palladium (NYSEMKT: PALL) settle for a 1.6% profit.

What about gold and silver?

Gold and silver have historically been hedges against uncertainty, especially in the macroeconomic and geopolitical fields. At the same time, its nature as a relatively fixed monetary base has 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 requires dramatic measures, including trillions of dollars in asset purchases, to try to shore up financial markets. So far, that has not led to any inflationary pressure. Eventually, however, some investors fear that inflation is inevitable. They expect gold and silver to do what they sometimes did in the past and protect them against the full impact of inflation.

That said, precious metals do have their downsides as investments. Long-term performance has been uneven, punctuated by substantial bear market movements that take years to play and wipe out large percentages of past gains. Furthermore, since metals do not generate income, the only return investors get is from favorable market movements. That compares poorly to stocks, many of which pay dividend income that adds to the total returns on capital gains.

Precious metal markets have a loyal following, and many investors believe this is the beginning of a long-term trend. With all the uncertainty in the markets right now, it is definitely possible that the gold, silver and platinum group metals could continue to function.