Investors can find plenty of quality stocks in the FTSE 100 with serious long-term potential. Here’s one I think is worth considering given the bright outlook for precious metal prices.
Going for gold
Gold’s price boom has been one of the major financial stories of recent times. Safe-haven interest has driven the yellow metal 28% higher in 2025, though its ascent isn’t just a recent phenomenon.
According to The Gold Bullion Company, a £1k investment in gold at the start of 2015 would have grown to £2,977.87 by April. This represents an average annual rate of return of 11.4%.
To put that into context, the Footsie has delivered a far lower return of 6.3% over that time.
I’m confident that gold can continue rising strongly over the coming decade as well, driven by a changing geopolitical landscape and likely depreciation in the US dollar. But rather than buying physical gold or a price-tracking fund, I think buying shares in precious metals producers could be a better option to consider.
Mexican giant
Fresnillo (LSE:FRES) is one such share I think is worth a close look right now.
There are two main advantages of buying mining stocks like this:
- As well as letting investors track the gold price, mining stocks can also deliver passive income in the form of a regular dividend. Fresnillo itself has a long record of paying dividends, and carries yields above 3% for the next three years.
- Profits at commodity producers can grow more rapidly than the rate at which metal prices increase. This is because their costs are relatively fixed, meaning even a modest rise in gold values can substantially increase margins and earnings.
The downside is that production problems (like strike action, machinery outages, or declining ore grades) are common threats that can impact miners’ ability to capitalise on market movements. This is something that owners of physical metal or gold-tracking funds don’t have to face.
Yet, on balance, I think the potential rewards of owning Fresnillo in particular outweigh such risks. What’s more, with eight operating mines across Mexico, it can absorb disruptions at one or two of its mines more effectively than smaller operators.
A FTSE bargain
There are other more specific reasons why I find Fresnillo shares attractive for the next decade. As a major silver producer as well, it’s well placed to capitalise on long-term economic growth given the grey metal’s extensive industrial applications.
Around half the world’s silver is used in products like consumer electronics, solar panels, automobiles, and medical devices. And like gold, safe-haven interest and further US dollar falls should support the metal for investment purposes.
Fresnillo also has a healthy pipeline of exploration projects across South America to boost earnings in the coming decades. These include Guanajuato, Rodeo, and Orisyvo — the latter is tipped for maiden production in 2027, and is said to contain 9.6m ounces of gold and 13m ounces of silver.
City analysts think Fresnillo’s earnings will soar 194% in 2025. This leaves it trading on a forward price-to-earnings-to-growth (PEG) ratio of just 0.1.
At today’s price, I think the FTSE firm deserves serious consideration.
