Gold and silver have struggled so far in 2026. The gold price is down almost 20% from the January highs. However, both precious metals have jumped over the past week, fuelled by a variety of factors. Based on my positive outlook, I think a continued rally could help certain FTSE shares to outperform.

One of the main reasons precious metals have struggled this year is that expectations for interest rates have risen amid inflationary pressure driven by higher energy prices. Gold and silver are negatively impacted because they don’t pay any interest. So holding them when everyone is anticipating higher rates isn’t appealing.

However, with signs of a confirmed US-Iran peace deal in recent days, oil prices are falling. This should ease inflation and potentially allow some central bankers to hike interest rates less than previously anticipated. This is good for gold and silver.

Another reason why I think the slump could be over is a report out yesterday (16 June) from the World Gold Council. The survey of central bank members showed 89% of respondents expect global central bank gold reserves to rise over the next 12 months, while a record 45% expect to increase their own holdings.

This public sector of gold and silver buyers has grown increasingly large in recent years, and this survey is a good indication that the recent dip could be bought.

Translating it to stocks

Fresnillo (LSE:FRES) is one of the cleanest ways, in my view, to try and capture a rally in precious metals. After all, it’s one of the world’s largest precious metals miners, with its roots in Mexico and a business focused mainly on silver, alongside gold production.

The share price is up 123% over the past year, which speaks to the operational leverage it has benefited from already in the move higher in metals over this period. At a basic level, it mines the metals and then sells at the prevailing market price. That means revenue can rise sharply when precious metal prices increase, while costs often move more slowly. This operating leverage is why miners can sometimes deliver bigger share price moves than the underlying commodity.

If my view is correct for the coming months, higher silver and gold prices would directly boost the value of Fresnillo’s output. This, in turn, would improve cash flow and profit margins. Silver also has an interesting profile because it is not only a precious metal but also an industrial material used in areas such as electronics and renewable energy.

However, investors should remember that mining is a cyclical and unpredictable business. A fall in silver or gold prices would quickly hit profitability. Fresnillo also faces operational risks given the challenges of operating mines in Mexico. But when I put everything together, I think it’s a stock worth considering for investors who want to explore this precious metals theme.

Should you invest £5,000 in Fresnillo Plc right now?

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Jon Smith has no positions in the shares mentioned.