Looking for lifeboats as financial markets sink? Here’s what I think might be one of the greatest FTSE 100 stocks to consider today.
A classic safe haven
While stock markets threaten to crash, gold prices continue to go from strength to strength. Retail demand for the yellow metal is at levels not seen since the Covid-19 crisis. And today, prices reached fresh peaks above $3,500 per ounce.
Astonishingly, gold has posted daily gains of $100 or more in three of the last eight days. This has pulled the share prices of precious metal producers like Fresnillo (LSE:FRES) through the roof.
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This particular FTSE 100 miner has just burst through £10 per share for the first time since early 2021. I think it could continue surging.
Gold’s risen 44% over the past year, propelled by expectations of inflation-boosting interest rate cuts. Signs of growing geopolitical tension and the introduction of growth-sapping trade tariffs have also driven prices higher.
Fed tensions increase
But this isn’t all. More recently, precious metals have soared on threats by US President Donald Trump to remove Federal Reserve chief Jerome Powell.
To Adrian Ash, analyst at gold retailer BullionVault, this comes as no surprise. He that explains: “gold tends to do well when other assets do badly, but it does best when people lose faith in central banks, and Trump is doing everything he can to destroy trust and confidence in the Federal Reserve.”
The threat to the Fed’s impartiality and the US economy has also hammered the US dollar, giving gold added support. A subdued buck makes it cheaper to buy dollar-denominated assets like commodities.
Incidentally, a weaker US currency provides Fresnillo — which incurs expenses in Mexican pesos but reports in dollars — with an exchange rate boost.
With no signs of the White House watering down its rhetoric or altering its economic policies, I expect conditions to remain supportive for gold and for gold producers.
Taking stock
I like gold stocks like Fresnillo in this climate, as their earnings growth tends to outpace increases in the metal price. Simply put, most of their costs are fixed, meaning that almost every extra dollar earned flows straight to the bottom line when gold values increase, amplifying profits growth.
Gold prices are substantially ahead of Fresnillo’s all-in sustaining costs (AISCs), which in 2024 averaged $1,578.45 per ounce across its gold operations. And with bullion continuing to trend higher, the margin between market price and production cost is steadily widening, further magnifying the Footsie firm’s gains.
It’s important to remember that the Mexican company’s also a major silver producer, and that the outlook here is less encouraging than that of gold. As the global economy cools, the dual-role metal could slump if industrial consumption falls.
While more price choppiness could be ahead, silver prices at the moment remain comfortably ahead of the miner’s silver AISCs (these averaged $18.52 per ounce last year). A sharp decline can’t be ruled out, but for now, the company still has a comfortable margin to maintain strong profitability.
With gold prices soaring, I think that Fresnillo’s one of the best FTSE 100 stocks to consider buying in the current climate.
