As gold hits $4,000, can Fresnillo shares keep their FTSE 100 crown?

After years in the doldrums, plagued by operational challenges and weak metal prices, Fresnillo (LSE: FRES) shares have come alive in 2025. At the beginning of the year, the stock was changing hands for 623p. Today it is 275% higher, making it the best performer in the FTSE 100 by a country mile. With gold now topping $4,000, can the stock maintain its leadership?

Money printing

Over 100 years ago, banker JP Morgan famously said: “Gold is money, everything else is credit.” This speaks of the intrinsic value of gold. Paper money and bonds are merely IOUs. That is why gold has no counterparty risk.

In the last 15 years, the US Federal Reserve has engaged in a dangerous game of printing more and more money out of thin air. It did it in the aftermath of the global financial crisis. But it took it to a whole new level during Covid, with helicopter money arriving directly in citizens’ bank accounts.

Looking back now, it is astonishing to believe that central bankers did not envisage that such a monetary policy would not lead to inflation.

Now that the genie is out of the bottle, putting it back again will not be easy. The long-term effects are there for all to see, with inflation eroding the purchasing power of the US and UK consumer.

Central banks

What is interesting to observe is that foreign central banks have been steadily buying gold and silver for years. But in January 2025, long before tariffs were announced, the likes of China and Russia took it to a whole new level.

The run on the London Bullion Markets Association, the oldest gold exchange in the world, was simply unprecedented. Yet, despite this move, I think most retail investors were asleep at the wheel, transfixed by the Magnificent 7 stocks.

With gold prices having gone up so far and so fast, is an imminent pullback on the cards? I do not know the future and that could certainly happen. But the largest buyers of gold today are central banks. So an investor must ask themselves whether they think that record metal prices will influence their buying decisions. I would say no, as their sole goal is accumulation.

Cash cow

At its H1 results back in August, investors began to wake up to the true potential of the miner. Earnings per share rose a mind-boggling 399%. Simply put, the impact of the higher gold price environment is going straight into the miner’s bottom line.

Of course, that works both ways. So if prices fall, the stock would likely fall at a much faster rate.

Fresnillo is not only a precious metals producer but also a major explorer. Exploration is fraught with danger. A disappointing drill result can result in a downgrade of total resources. But even if successful in making a new discovery there is no guarantee that a mine will ever be built.

Bottom line

I have been bullish on precious metals for some time and remain so. Despite the surge in gold prices I would not describe it as a bubble. For investors with little or no exposure to precious metal miners, I view the stock as certainly one worth considering.

The post As gold hits $4,000, can Fresnillo shares keep their FTSE 100 crown? appeared first on The Motley Fool UK.

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Andrew Mackie has positions in Fresnillo Plc. The Motley Fool UK has recommended Fresnillo Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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