It was a brutal day on the market yesterday with losing stocks outnumbering winners 14:1. Gold and silver stocks were among the biggest losers without a single metals stock on the NYSE, AMEX or NASDAQ posting gains.

Hecla, though, stands out as one of the biggest losers after tumbling 59 cents per share or 11.5 percent. That fall slashed the company’s market cap by more than $100 million in a single day of trading. Speculators, it appears, ran for the hills after hearing unemployment claims bumped up for the fourth time in five weeks.

480,000 people sought jobless benefits last week, and that means today’s unemployment numbers for January aren’t going to be good. Indeed, economists are calling for a 10.1 percent unemployment rate. Not good.

Why did Hecla get crushed?

In January, Hecla Mining Company’s (NYSE:HL) execs decided to sell some $2.5 million in stock. That was enough for me to jump ship. They’re all about the money. If they thought the stock was going to keep climbing in the short-run, they wouldn’t have sold (even if the shares were a tax liability as they claimed).

Taxes are a witch, of course, and it’s understandable that they wanted to avoid them. Still, the reasons why the execs had a lot of shares in the first place is even more troubling: Hecla had to defer their salaries in the form of restricted shares.

This all comes after to eyes-are-bigger-than-my-belly acquisition of the Greens Creek mine from Rio Tinto PLC (NYSE:RTP). In the wake of that buy, Hecla was forced into a series of equity offerings after the market tanked in 2008. They’ve been paying for it ever since.

Picking the best junior gold mining stocks is difficult to say the least – particularly since many junior mining stocks are in the exploration stage (meaning they’re looking for gold, not pulling it out of the earth). Betting on a single company is betting that their gold exploration techniques (or partnerships) are better than their competitors.

A new ETF offered by Van Eck Global focuses solely on small and medium-cap mining stocks, which, theoretically, will take away some of the risk of investing in junior mining stocks. Of course, junior mining stocks are notorious for being volatile, so Van Eck’s new Market Vectors Junior Gold Miners ETF (NYSE:GDXJ) will likely prove volatile as well.

The fund opened at $25.41 on Nov. 11, 2009. Since then its returned 6.5 percent. That’s a bit better than the SPDR Gold Trust’s (NYSE:GLD) return of 4.98 percent during the same period, and quite a bit worse than Hecla Mining’s (NYSE:HL) return of 14.5 percent. Unlike a lot of ETFs that launch with a lot of buzz and disappear on low volume, the Market Vectors Junior Gold Miners ETF has been trading with heavy volume (occasionally breaking the 3 million shares mark).

Right now, the fund’s top 10 holdings include many of the better-known mid-caps – including Hecla Mining, Coeur D’Alene Mines Corp and Silver Standard Resources. Here’s a run-down of their current top 10 junior mining stocks:

“We believe the two key themes driving the gold market right now are gold as an alternative to paper currency and gold as a hedge against potential inflation,” the fund’s manger, Joe Foster, said in a press release the day the fund went live.

“While there have been no onerous levels of inflation so far in this gold cycle, firming commodities prices and the liquidity being created by current monetary policies could eventually bring much higher levels of inflation.”

Hands down, the most impressive gold stock this week has been Hecla Mining (NYSE:HL). The stock hit a fresh 52-week yesterday of $6.54, and it’s up 17.6 percent this week on enormous volume (about 40 percent as much volume as normal). Large increases in volume often indicate institutional buying – i.e. buying by hedge funds, mutual funds and other money managers – and that means Hecla might still have some legs.

In all, Hecla’s up 124 percent on the year, and it’s up more than 400 percent in the past 12 months. Not bad considering the stock was selling at $1.27 in March. Hecla reported some good news on Nov. 2 with their earnings report:

    •  Q3 profits: $26 million.
    •  Profits equate to 9 cents per share.
    •  $87 million on hand.
    •  Operating margin leaped up from 2 percent to 31 percent.
    •  The company finally turned profitable after losing 5 cents per share in Q3 2008.

Gold mining stocks have been performing well as gold continues its ascent in anticipation of inflationary pressures on the greenback. Meanwhile, the dollar’s dropped three out of the past four trading days, and it will likely continue to do so until the Fed indicates that it will rein in rates. All that’s good news for Hecla – even if the stock suffers a slight pullback after gaining 17 percent in three days.

As we move into November, the general stock market seems more likely for a sell-off than anything else, and that could provide some buying opportunities for a lot of industries. Our favorites, of course, are junior mining stocks such as Hecla Mining Company (HL), Endeavour Silver Corp. (EXK), and Paramount Gold and Silver Corp. (PZG). Well-placed mining picks this week, could have ridden waves in buying sentiment for 10 percent+ gains in mining stocks, while the week’s gains for gold were negligible.

Trading in junior mining stocks is risky, but the logic for long-term buying is sound – especially if you believe prices for gold and silver are due for an inflation-powered rise over the next year or so. Lorimer Wilson has some interesting commentary at Kitco.com, that talks about the potential for returns in junior miners if gold spikes above $5,000 per ounce.

Since mining stocks are leveraged, they stand to benefit more than anyone else from the rise in gold and silver prices. “If gold were to increase from its current range of $1030–$1060 to $5,800 as projected by the Aden sisters that would represent an increase of approximately 455 percent,” Wilson writes. “The current leverage exhibited by the component stocks of the HUI is 2.2:1 vis-à-vis gold. Were that leverage applied to future gold and silver mining/royalty company equity prices it would extrapolate into an average price increase of approximately 1000 percent (455×2.2) for such large-cap stocks.” Read more.