From a peak a week ago, the Fresnillo (LSE: FRES) share price has fallen 17%. It comes as surges in gold and silver prices just turned downwards. At the time of writing on 23 October, gold has retreated 6% from its high, with silver down 10%.
Is it time to panic and sell Fresnillo shares, or should we buy now the price is down? I say it’s never time to panic. And we need to put this fall into some perspective.
Cracking ride
Fresnillo investors who saw the flight to safety that’s driven up precious metals prices have done well. Those who bought 12 months ago are today sitting on a 185% gain. That’s more than made up for the previous few years’ slide, with the Fresnillo share price up 79% over the past five years.
But one thing this does show is that shares in precious metals miners can be just as volatile as the metals themselves.
There’s one thing that does strike me as strange right now. Markets tend to swing in favour of so-called safe assets during times of stock market weakness. The focus shifts from risky assets like shares in companies whose profits are under question, and towards those centuries-long stores of wealth.
But right now, stock markets are booming too. Nobody can have failed to see the huge rises in AI stocks. In fact, every day the headlines are reporting on the latest City expert telling us the bubble is set to burst.
Can’t time it?
The trouble is, nobody can tell us when it might happen. It’s where that old saying comes from: if we knew the market was going to crash tomorrow, it would crash today.
It’s simply impossible to time any peaks in artificial intelligence (AI) stock prices. And the same is true for silver and gold — and by extension, the Fresnillo share price.
So what should a private investor do? I do my best to ignore what the daily headlines are shouting, and instead try to judge the long-term outlook for a business — any business, whether it’s making string or digging up precious dirt.
And I really can’t see a day when precious metals don’t form a big part of the world’s wealth-management strategies.
When to buy?
I don’t hold any silver- or gold-related stocks right now, though I’ve owned miners in the past. And I really might add some again in the not-too-distant future. If I do, Fresnillo will be a key candidate. I like the fact that it’s the world’s biggest primary silver producer. Silver has far more actual industrial uses than gold, rather than just sitting there looking shiny.
I’m not buying right now, though. As much as I admire this mining enterprise, the valuation remains quite frothy even after its recent tumble. And with fears of further potential declines in precious metal prices, more volatility may lie ahead. That’s why I’m taking a page out of Warren Buffett’s book and being patient, looking for more attractive investment opportunities elsewhere right now. At Berkshire Hathaway he’s holding around $340bn in cash, waiting for better buying opportunities ahead.
