Generally speaking, economic instability isn’t good for FTSE 100 stocks. During difficult times, investors tend to abandon equities and look for other assets in which to invest.
One favourite is gold. It has a reputation for being a reliable store of wealth. Because of this, it’s often viewed as an effective hedge against inflation.
And as a result of President Trump’s erratic ‘on-off’ approach to tariffs, fears of slowing global economic growth and continuing regional conflicts, the precious metal is doing rather well at the moment.
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So far in 2025, its price has set a number of record highs and this morning (14 March) it broke through the $3,000/oz barrier for the first time. It’s taken less than five years to get from $2,000/oz.
How times have changed.
Nearly 25 years ago, my first investment was in a unit trust specialising in precious metals. At the time, gold was trading at $300/oz. Unfortunately, I sold up long ago.
One possible beneficiary
But there’s one FTSE 100 stock, Endeavour Mining (LSE:EDV) that should benefit from a rising gold price.
In 2024, production from its mines in West Africa was 1,103koz (thousand ounces). For 2025, it’s forecasting a range of 1,110-1,260koz. At the top end, this would be 14% more.
The group claims that it has a “class-leading” cost of production. Miners use All-In Sustaining Cost (AISC) to measure this. In the last quarter of 2024, Endeavour Mining said its AISC was $1,141. And with gold above $3,000, there’s clearly plenty of profit to be made.
Also, in my opinion, there are other positives. Unlike gold, the stock pays a healthy dividend. Its declared payout for 2024 is $0.98 (75.8p at current exchange rates). This means the stock’s presently yielding 4.5% and that puts it in the top quartile of Footsie members.
Of course, payouts are never guaranteed.
Then and now
Since 14 June 2021, when the company first listed in London, its share price has risen by just under 5%. Yet, over the same period, the price of gold has rocketed 67%. Initially, this was a bit of a puzzle to me. However, a closer look at the numbers explains why the group’s stock market valuation has stagnated.
As a result of selling some of its non-core assets, it’s now producing less than it was previously. And its earnings are largely unchanged.
In 2024, the 1,103koz of gold that it mined generated revenue of $2.68bn. Its adjusted net earnings per share (EPS) from continuing operations was $0.93 (72p).
In 2021, production was 1,524koz resulting in turnover of $2.78bn. Its EPS was $0.92.
Final thoughts
Despite the plus points, I don’t want to invest.
A rising gold price is a double-edged sword. Yes, it should help increase the group’s margin and earnings. However, a higher price is like to affect demand. This could be impacted further if the fears driving the gold price higher come true.
And despite its recent bull run, the price of gold can be volatile.
Also, from an operational perspective, I reckon mining is the most difficult industry in the world. At the time of its listing, Endeavour Mining’s prospectus devoted 23 pages to a detailed explanation of the challenges that the group faces.
For these reasons, the stock’s too risky for me.
