Mormon alludes to the Savior’s sermon at Bountiful. The discussion of “good gifts,” and particularly the relationship between visible works and internal righteousness, comes from 3 Nephi 14:7–20. Mormon introduces the scripture as “the word of God,” then paraphrases the text. Obviously, he expects the congregation to be familiar with the reference, understanding both the allusion and how he is recasting the original.
Mormon uses the example that the Savior gave to describe the goodness of his listeners. He is not talking about a generic concept but referring specifically to this people and their “peaceable walk” under difficult circumstances. Their righteousness shows in their actions toward others—in this case, their peaceableness in the midst of terrible conflict.