Digging for profits in metals and minerals
David Prosser on gold and other commodities vital to the global economy.
With stock markets around the world continuing to hit new highs in recent weeks, investors could be forgiven for overlooking another asset that’s also booming. The price of precious metals has soared this year: gold is at an all-time high, with investors feeling anxious about political instability and economic uncertainty gravitating to an asset long seen as a safe haven. The silver market is also enjoying a long bull run.
More broadly, the whole metals sector looks interesting right now. Gold and silver have been conventional investment plays for many years, but it is possible to invest in a wide variety of other metals and minerals – and good reason to think about doing so in the context of the climate change emergency.
The International Energy Agency (IEA) thinks demand for critical minerals could triple by 2040.
David Prosser
Importantly, lithium, nickel and cobalt are critical components in battery production for electric vehicles, while electricity grid renewal, so vital for the transition to renewable energy, will require huge quantities of copper and aluminium. On this basis, the International Energy Agency (IEA) thinks demand for critical minerals could triple by 2040.
That trend is already in full swing. The IEA says that last year alone, lithium demand rose by nearly 30%, while demand for nickel, cobalt, graphite and rare earths increased by 6-8%. Prices of many of these metals and minerals fell during 2024, following a significant increase in supply after several years of investment by miners, but have been much more stable in 2025.
Investor interest is also growing in uranium, amid increasing global demand for nuclear energy production, another way for countries to decarbonise. Supply constraints in the uranium sector have the potential to support price appreciation in the years ahead.
How, though, do retail investors access these opportunities? For many, the easiest way into this asset class will be through the Commodities & Natural Resources sector of the investment trust industry. Seven investment trusts specialise in metals, minerals and related assets – these funds vary enormously but invest in both the commodities themselves and the companies that mine and produce them.
The structure of an investment trust can be a good match for commodities investment because the asset class can sometimes be both volatile and illiquid. Open-ended funds, which fluctuate in size according to investor demand, may struggle to cope with these challenges. A collective fund approach to commodities also provides investors with access to professional expertise in an asset class that is complicated and often opaque.
It should be said that some gold market analysts and commodity fund managers are split on whether recent advances will increase. Some say gold now looks relatively expensive by historical standards – and the link to the broader economic and political backdrop makes short-term forecasting especially difficult.
However, the investment thesis for the wider commodities sector is a strong one for investors prepared to take a long-term view. The world has no choice but to embrace electric vehicles and clean energy – it will not be able to do so without buying very large quantities of metals and minerals. Over time, investors should benefit accordingly.
It's also worth pointing out that commodities can offer valuable diversification benefits, especially where investors are exposed to them directly rather than through shares in listed mining companies. It’s an asset class that can help investors to spread their bets beyond the narrow focus of equities, fixed income and cash that characterises most people’s portfolios.
David Prosser
David is former Business Editor of The Independent, Personal Finance Editor of the Daily Express, and Deputy Editor of Money Observer magazine. He writes regularly for the AIC.
