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On Friday (15 March), the gold price made a fresh all-time high, breaking above $3,000 per oz. This is a huge psychological barrier to have hit, with a lot of investors focused on the news. Yet the benefit of this move could be felt via higher share prices this year for some specific UK stocks. Here are two for investors to consider.
A gold miner
Fresnillo (LSE:FRES) could stand to gain on the gold price spike. While primarily a silver miner, it has substantial gold production too, generating significant revenue from higher gold prices.
Over the last year, the stock is up a whopping 97%. Part of this can be attributed to the move higher in gold and silver prices before the latest barrier was smashed. Fundamentally, revenue from the producer is impacted by the end selling price. So it doesn’t surprise me that the 2024 results showed a 26.9% increase in revenue versus 2023. EBITDA more than doubled!
Aside from just the price rises, the CEO spoke about “operational discipline and a continued focus on cost efficiencies.” This is great, and should help the company regardless of what happens to precious metal prices this year. Yet with gold hitting $3,000, I believe Fresnillo will feel the benefits, with elevated selling prices further boosting revenue this year.
One risk going forward is production trouble at the Sabinas mine. This cropped up late last year, with any further issues negatively impacting finances this year as production output has to be adjusted lower.
Thinking outside the box
A second idea is HSBC (LSE:HSBA). The global banking share has risen by 48% over the past year. Yet some might wonder why I think a bank could do well with rising gold prices. Stay with me.
The first reason is due to the fact that it has exposure to gold trading and investment products. If gold prices surge, demand for gold-backed ETFs and financial products should rise, benefitting the bank’s trading revenues.
Another reason is understanding why gold prices are rallying. It’s mostly due to investors rushing to buy a safe-haven asset, due to uncertainty in the world right now. With people worried, another sign will be increasing cash holdings. This will benefit the business, as it pays a modest amount of interest on deposits, while it receives interest close to the bank base rate. This profit should increase if people keep holding cash.
I’m conscious that the company could be negatively impacted by further interest rate cuts from the UK and US this year. If this happens, the net interest margin will shrink, putting pressure on profits later in 2025.
Ultimately, I think both stocks are worth considering for an investor who wants to take advantage of the recent gold move.
