Oddly enough, it had nothing to do with boxing. It originally was given to describe his basketball shooting ability as a teenager on his club team.
I remember someone on this forum years ago said it was from a very early fight where he battered his opponent badly, and either the opponent or the opponent's trainer were very suspicious that his gloves/wraps were 'loaded' in some way. So the opponent or his trainer made sure he was close by and watching when the gloves were removed, inspected the gloves and wraps and found everything was legit and said : "You must have hands of stone !"
There was this guy who lived on my street who beat a lot of the neighborhood guys in boxing matches, I think he would have knocked out a prime Roberto Duran. He was that good. He was like 140 pounds but very lean and ripped and he was knocking out 250 pound guys. Duran never knocked out anyone that big.