In the last 15 months, Fresnillo (LSE: FRES) stock has trebled in price. Most of this gain has been down to exploding gold prices, which continue to hit successive record highs. But in the last 10 trading days, silver prices have risen by over 4%, twice. As a long-term follower of gold’s cheaper cousin, I believe we are on the cusp of another explosive move for silver.
History matters
I’m a firm believer in using history to help me make informed investment decisions. For most of the last decade, many believed that gold and silver had lost their status as safe haven assets. Competition from bitcoin partly helped to explain such a rationale. But those who doubted the metals credentials are being forced to reassess.
The primary reason why I invest in precious metal miners is because of a long-held belief that we are entering a critical phase of global monetary realignment. Scott Bessent, the US Treasury Secretary, has been talking about this very point long before he joined the Trump administration.
Since the election of Trump, what we have seen is an unprecedented repatriation of gold and silver by central banks. The fact that they don’t want paper contracts but the real thing deposited in their vaults, points to the fact that trust in the Western banking system is breaking down.
Silver is too cheap
Silver prices act nothing like any other commodity on the planet. Technical charts and the like, that so many analysts love to use, are useless when it comes to predicting future price moves. To my mind, the only way to profit from an explosion in silver prices, is to be in ahead of time.
A good way to understand how silver prices move is through an analogy of cracking the whip. First the handle (gold) moves. Then the large cap miners move. The tip of the whip takes the longest to move, but when it does it’s the fastest and most explosive. That is silver and the small-cap silver miners.
Fresnillo is not only the largest primary silver producer in the world, but it has a track record of finding and bringing new silver deposits on line. Juanicipio, its joint venture with MAG Silver, is one such example. That find has added 74moz of silver resources to its portfolio.
Potential pullback
Gold prices have moved so incredibly fast recently, that I do fear a pullback. In fact, the chances of one occurring are extremely high. That is a definite risk to Fresnillo stock. However, the only way I see silver prices falling heavily from here is if a recession ensues. This is because silver is not only a monetary metal but an industrial one too.
But only last week the CEO of JPMorgan Chase warned of an impending crisis in both the stock and bond markets unless action is taken to rein in US government debt. We have already seen the US dollar weaken substantially lately.
With the stage being set for a multi-year bull market in precious metals, I continue to add to my Fresnillo holdings at every opportunity. I still very much believe that the share price will move considerably higher over the next several years.
