As silver tops $40, this FTSE 100 stock looks set to continue to outperform Rolls-Royce
18 months ago when silver smashed through $30, I stated that FTSE 100 stock Fresnillo (LSE: FRES) was set for an explosive move. So it turned out to be.
Over that timeframe the Mexican gold and silver miner has simply blown away every other stock in Londonâs premium listing, including that of Rolls-Royce. Now that silver has topped $40, is it about to repeat the feat all over again?
Central banks
Today, everyone is talking about gold, and rightly so. But not a lot of investors are talking about its cheaper cousin, silver.
Like gold, silver is a monetary metal. The reason why both metals have such a status is because they’re neutral assets with no counterparty risk. This means that their value isn’t reliant on any government or financial institution, unlike say, cash or bonds. They also carry centuries of credible history as a haven and monetary alternative.
As debt levels across Western governments spiral out of control, global central banks are scrambling to get their hands on as much gold and silver as they can, in order to shore up the quality of their international reserves.
In early 2025, long before tariffs were announced, the London Bullion Market Association was inundated with contracts for gold and silver, most notably from Chinese and Russian central banks. This move led me to hypothesise that faith in the current global financial system (with the US dollar at its core) was beginning to break down.
Metal in demand
Outside of its monetary status, silver is one of the most versatile metals on the planet, with demand set to explode over the next decade.
Silver is a major constituent of photovoltaic panels, batteries and EVs. If I just take solar panels as one example, Elon Musk and Tesla have long talked about converting huge swathes of US desert land into solar farms to power xAI, as well as accelerate a move towards greater reliance on renewable power generation.
My biggest concern is that the global energy transition is likely to falter in the years ahead because there simply isnât enough known global silver resources out there to meet an expected surge in demand.
Pull back
One of the biggest short-term risks for Fresnillo is that the stock could face a significant pullback over the coming months, as many investors decide to take profit. It could also happen because precious metal prices falter.
Investing in precious metals miners is inherently risky, simply because mining for metals isn’t easy and is subject to so many uncontrollable external factors. Last week Hochschild Mining stock fell heavily when it failed to meet production targets, as a result of heavy rainfall and contractor issues. Such issues have beset Fresnillo in the recent past.
Bottom line
Many investors probably believe that after a 300% run up in the stock over the past 18 months, the bull run will shortly run out of steam. I don’t sit in that camp.
The two gold bull markets of the 1970s and 2000s lasted a decade. During both cycles, silver prices eventually outpaced that of gold, as it soared to $50. That’s the path I believe we’re on, now that silver has broken through the psychological barrier of $40. So I see Fresnillo as a stock worthy of further research.
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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.
