Where Gold and Copper Prices Go From Here -- and 3 Mining Stocks to Own Either Way
Commodity prices have fluctuated wildly over the past several years. Gold prices reached a record high of nearly $5,600 per ounce in January, but they have since plunged 26%. But it may not be over for the precious metal as fiscal deficits rise and geopolitical tensions persist.
According to the World Gold Council, central banks, including those in Asia, Eastern Europe, and the Middle East, have been accumulating gold and diversifying reserves. Central bank gold purchases have doubled since 2022, following the freeze of approximately $300 billion in Russian foreign exchange reserves.
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In the third quarter, central banks purchased 321 metric tons of gold to their reserves, the fastest pace of buying since late 2024. According to research from JPMorgan Chase, gold prices could climb to $6,300 per ounce by 2027.
While gold is rising amid rising debts and debasement fears, copper is rising amid strong demand from infrastructure projects, including data centers, power grid upgrades, and renewable energy build-outs. Analysts forecast multi-year copper supply deficits , and the World Bank recently forecast copper prices to rise another 18% in 2027.
Commodities have come into focus in recent years amid growing government deficits and robust infrastructure demand, and these three stocks let investors capture the upside and high margins as demand booms and supply remains tight.
Freeport-McMoRan is a massive producer of copper
Freeport-McMoRan(NYSE: FCX) is one of the world's largest copper producers and also produces large amounts of gold and molybdenum. It owns a range of Tier-1 assets across North America, South America, and Indonesia, and its business spans large-scale open-pit and underground mining, as well as downstream smelting, refining, and rod production.
In the mining industry, building a new mine from scratch (greenfield projects) is a massive undertaking that can take decades before delivering production. What makes Freeport stand out among competitors is its slew of brownfield projects, which expand or modify existing mines. Management points out that almost all of Freeport's growth pipeline is brownfield, which lowers capital intensity and enables new production in a few years.
Through the first three quarters of this year, Freeport has sold almost 2.1 billion pounds of copper, with projected full-year sales of 3 billion pounds. In addition, Freeport produced 234,000 ounces of gold and sold 105,000 ounces during the third quarter, realizing $4,273 per ounce.
Looking longer-term, management projects copper sales volumes to grow 20% in 2027 and another 10% in 2028 as it ramps up production at Grasberg Block Cave. The company expects to produce 5.4 million ounces of gold and 6.7 million pounds of copper over the next four years from Grasberg, one of the world's largest copper and gold deposits.
Newmont is seeing record cash flows as gold prices stay elevated
Newmont(NYSE: NEM) is the world's largest gold producer and also mines and processes copper, silver, zinc, and lead. The company also owns assets across Tier-1 jurisdictions, including North America, South America, Australia, and Africa.
The company's advantage is its massive scale. As an industry-leading producer, Newmont targets 5.3 million gold ounces annually. This massive scale has benefited Newmont, which has realized an average sale price of $4,546 per ounce of gold, a 29% increase from one year ago. On top of this, Newmont's all-in sustaining costs this year are projected at $1,520 per ounce, leaving it room for substantial margins.
Newmont is seeing record earnings and strong free cash flow, along with key projects advancing ahead of schedule. CEO Natascha Viljoen told investors, "We are entering an exciting period for Newmont," and that the company is "well positioned to deliver production growth beginning in 2027," with a longer-term goal to produce 6 million ounces of gold per year.
Franco-Nevada offers exposure to precious metals without the operational risk
Franco-Nevada(NYSE: FNV) doesn't operate mines, build infrastructure, or employ laborers in mines. Instead, the company provides upfront funding to mining companies in exchange for royalties (a percentage of sales) and streams (the right to purchase a percentage of future production at a predetermined price).
This business model is more favorable than that of miners because Franco-Nevada doesn't take on the risks associated with traditional mining. Mine operators' biggest risk is soaring fuel, labor, or equipment costs, which can drive up mining costs and compress margins. As a result, the company is insulated from operating cost inflation -- which has come into focus this year with rising diesel prices amid the ongoing Iran conflict.
Roughly 85% of Franco's revenue comes from precious metals, with gold making up the bulk. In the first half of the year, Franco sold 182,382 ounces of gold, generating $840 million in revenue. Its adjusted EBITDA margin was a stellar 91%, illustrating its low cash costs for gold and strong upside from rising prices.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Courtney Carlsen has positions in Franco-Nevada and JPMorgan Chase. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Franco-Nevada. The Motley Fool has a disclosure policy .
Where Gold and Copper Prices Go From Here -- and 3 Mining Stocks to Own Either Way was originally published by The Motley Fool
