Safe Havens: The Enduring Stability of Precious Metals in Turbulent Times

 In this episode of Shifting Energy (Season 2), Steve Schoffstall, Director, ETF Product Management and John Kinnane, Director, Key Accounts at Sprott Asset Management chat about how investors are navigating bumpy markets and global trade wars with assets like gold and silver. (Please note that this video was filmed on April 9, 2025.)

For the latest standardized performance, please visit the individual website pages: SLVR, GBUG, SGDM, SGDJ, URNM, URNJ, COPP, COPJ and SETM. Past performance is no guarantee of future results.

Video Transcript

How have investors been handling market uncertainty?

Steven Schoffstall: With all that market uncertainty around tariffs and geopolitical risks, I'm sure you've been busy talking to clients and allocators in your role as director of key accounts. Can you tell us a little about what those conversations have been like?

John Kinnane: Sprott serves individual investors and an institutional client base. I think what those two groups have in common is that there's a lack of certainty in the capital markets right now. Broad allocators to U.S. markets were richly rewarded in the past 2 years. In 2023 and 2024, the S&P 500 returned over 20% in both years. But since Liberation Day, April 2 of this year, the playbooks for 2025 have been scrambled a little bit. With the uncertainty of tariffs, heightened trade wars, inflation and higher for longer rates, investors of all kinds are looking for some stability and their next move.

Steven Schoffstall: That makes sense. I think gold is one of those commodities we typically don't discuss with critical materials. But when you start thinking of silver and how that's both a precious metal and an industrial metal, we're seeing a lot of interest in the precious metal space, particularly for its ability to be able to smooth out some of that volatility, in many cases, outperform in those down periods.

Year to date, we see gold is up about 14% through yesterday [March 6, 2025]. While the S&P 500 is down about 15% on the gold equity side, we see those up about 23% this year. Silver is somewhat less muted because it has that industrial component with the precious metals component, and is up about 3% this year. I think those two metals have been performing well as a hedge. I think a lot of times when people think of a hedge, it has to be; if the S&P is down, the hedge has to be up. That happens to be the case at this moment. But we do see periods where they might move similarly.

How are gold and silver being used as investment tools?

Steven Schoffstall: What are you hearing from investors around gold, and in particular, silver, as it relates to the volatility that you're seeing?

John Kinnane: One of the enduring qualities of gold is that it's an uncorrelated asset. Investors of all kinds are looking for low correlations so that they have smoother returns for their overall portfolio in times of volatility, like we're in right now. And gold has proven once again that it is an uncorrelated asset. Silver sometimes lives in gold's long shadow. Silver has two drivers of protection, both as a monetary tool and significant demand from its industrial components. We also see it as a vital component of allocating precious metals.

Steven Schoffstall: I think that's a great point. When you start looking at gold and silver, there are some similarities. They have a low to moderate correlation to the S&P 500 and broader-based indexes, whether it's bonds or a negative correlation to the US dollar. When you look at gold, specifically in the gold equity side, typically what you see on a relative basis is that they have higher dividend yields and are more profitable than what you see from the S&P 500.

Silver is a little different in that case because it has the attributes of precious metals. It also has the industrial component where we see the ability to potentially ride out some of that volatility from the precious metal side, and on the industrial side, we see that growth characteristic common in other critical materials. When you start looking at the production of silver, it's estimated that we've been in a deficit now for six straight years, because we're not pulling enough silver out of the ground. It's very similar to what we see with other commodities. Uranium is a great example of that.

What’s the current and projected market demand for uranium?

Steven Schoffstall: I'm just interested in your thoughts and what you're hearing from advisors and investors about uranium. It has been a little soft lately, but I'm wondering what those conversations have looked like for you.

John Kinnane: As a firm, Sprott has been extremely bullish on uranium since 2018. As of today, we're the largest manager of physically-backed and equity-related uranium mining strategy. It's something we're very proud of. As the middle class comes online significantly, buying more goods for their home and a more consumptive class, the electricity demand, not only in this country, but around the world, is increasing. The demand for AI is increasing. The demand for fiber optic cable and Internet-based services is increasing. As the demand for electricity goes up, so does the need for a clean, reliable resource to drive that demand.

Steven Schoffstall: When you start looking at the broader critical material space, I think you've hit the nail on the head. It is about electricity growth. Going out through 2050, estimates are up around 160% or so on expected electricity growth. All of that is very much, in our view, very supportive of the longer-term notion for uranium and investing in uranium. We expect to see, as we continue through this decade, that the market flips into a deficit and stays there for a prolonged period. Estimates have that the deficit will be a million pounds or more cumulative by 2040.

I think the important thing, and I'm sure you've come across this through your conversations, is getting investors to focus on the longer-term allocation, why they entered trades in the first place, and the long-term expected benefits. Could you talk a bit about how you're hearing advisors think about allocations that they put on 6 months or a year ago, and maybe they're not performing in line with what the fundamentals are showing?

John Kinnane: Sure. There's a lot of noise in the market right now, volatility, and concerns about our direction. But as it relates to gold, there's a significant story that I don't think gets enough attention, and that's around central bank buying. Over the last decade, central banks have been net sellers of gold, and they've reversed that trend. They're now buyers. If you're from a country looking to decouple its currency from something like the US dollar, adding gold to your reserves only makes sense. Historically, gold attracts inflows when the faith in traditional asset classes has been shaken. In a period like ours right now, we're seeing much of that in exchange-traded vehicles and physically-backed assets.

Steven Schoffstall: Gold is one of those things that's a little bit different than other commodities. It has that reserve currency status. When you look at the geopolitical uncertainty we're seeing now, countries use it to move away from the dollar. They can move away from US bonds. In those cases, they can get physical possession of that gold, repatriate it to their home country, and not worry about things like sanctions or asset seizures. It's slightly different from what we see with other commodities. If you start thinking about uranium, that's not something where central banks or governments en masse are stockpiling uranium. We do see China is preparing for the future in that regard, but by and large, most countries aren't doing that.

What we see from a longer-term perspective, as it relates to uranium, is that you have an asset class, if you look at more recent times, where it's not being restricted by tariffs. There are no tariffs currently on uranium or precious metals, for that matter. But it also gives you a tariff-free commodity to a certain extent. But once you start looking through and at the attributes, it's uncorrelated to the market. The demand is inelastic to the overall economy because these utilities need to produce electricity, and if they produce it from nuclear energy, they must buy uranium.

Even in the shorter term, as we've seen some softness in areas of the market, fundamentally, the uranium market is still set up and structured well. Going into the medium to longer term, it will benefit from our shift, as it relates to the energy transition and the technological advances you discussed.

What’s the investment outlook for silver [demand]?

Steven Schoffstall: Along those same lines, just switching gears to silver for a moment. There’s a similar thing—we don't have the central bank buying. Can you talk a bit about how investors think about silver and its role in a portfolio in these times?

John Kinnane: Sure. One of the obvious things to point out about silver is that, as an entry point for a new precious metals investor, it's priced quite a bit lower than gold. It seems like a natural place to start. As a firm, we also focus on physical first. If it's a new allocation for you, start with maybe a coin or a physically backed asset class. That has to do with the volatility profile you'd expect in the equities. You'll get a higher torque to the physical price if you go to a silver mining equity. This year, year to date, we've seen tremendous flows into both gold and silver, both physical and the equity space.

Steven Schoffstall: I think the interesting component of silver is that industrial use case. It's got over 10,000 uses, and it's highly conductive. We see it being used in solar panels, which are expected to see significant growth through the rest of this decade and into the foreseeable future. From that standpoint, the dual quality as a precious metal and also an industrial metal, I think, is something that's resonating with investors.

As you're aware, we recently launched our Silver Miners & Physical Silver ETF, ticker SLVR. I believe investors have taken to that portfolio. One reason is that it's a pure-play strategy, and we're focusing on companies deriving a majority of the revenue from silver or physical silver. But when you start looking under the hood, it's vastly different from what we see from other silver mining ETFs. In particular, it gives about twice the silver exposure relative to competing ETF strategies.

What makes SLVR’s strategy uniquely different?

John Kinnane: Can you tell me about some of the differentiators this fund offers versus some existing products, particularly in the ETF vehicle?

Steven Schoffstall: First and foremost, it's the pure-play allocation. When you think about silver and how it's mined, it's different than what you might see with gold or uranium, which are great examples of how easy it is for a miner to be a uranium miner or a gold miner. Silver is primarily mined as a byproduct. Of the 10 largest silver-producing companies, none are primary silver miners. What that means is that they have things like iron ore, nickel, or coal, or whatever they're mining that could be drivers of their economic health or their decisions from an investment standpoint, when you focus in on the pure-play miners, that allows you to get more of that direct silver exposure through the miners and also through the physical component in this case.

However, it also cuts down on the amount of unintended exposure. When we see turbulent markets and geopolitics playing out daily, I think you're left with those strategies that give more of that targeted exposure. I would expect those to rise to the top in investor interest as they're looking to get away from assets moving toward a correlation of one. That low to moderate correlation, I think, is something that investors are latching onto.

Understanding COPP and COPJ for investing in copper

Steven Schoffstall: As we mentioned, tariffs—just flipping to copper for a moment. We have a physical copper strategy, but we also have two copper mining ETFs. Copper was in the news for the better part of the first 3 months of this year, given the influx of metal we've been sent to the U.S., taking advantage of higher prices in the U.S. relative to other parts of the globe. I’m interested to hear feedback from what you're hearing from clients, how they're thinking about copper and what role that might play in portfolios.

John Kinnane: Sure. The advisory community is always interested in our view on the EV revolution. How is electricity produced? How is it transmitted? How is it stored? None of that can happen without copper. Copper, perhaps, is the most critical material in this entire story. Whether we're creating new clean energy or using traditional fossil fuel energy production, none of that happens, not even any energy consumption, without copper.

Steven Schoffstall: One of the ways I think about copper is that it's the glue that holds pretty much all of society together. It's got so many uses. It's like a Swiss army knife, if we're going to keep throwing out analogies here.

What’s the investment outlook for copper?

Steven Schoffstall: Copper has pulled back a bit with some of the volatility we've seen. Typically, we see from copper that it has traditionally been a gauge of global economic health. In the last 5 years, we've seen a shift because the spending coming from the energy transition, mainly out of China and Europe, and to a lesser extent, North America, supports a base level of copper production and consumption. Just last year, $2 trillion, almost $2.1 trillion, was invested in the energy transition globally. It's somewhat of a demand floor on copper and is helpful in these volatile times.

We see some changes in the market in the short term with current events, tariffs, and potential trade wars. I just read last week how China has taken the recent dip in copper prices as an opportunity to start buying the physical metal. That pricing dislocation we saw for the first three months has somewhat normalized, though there's still some opportunity.

One of the things we're seeing is that, directly after the tariffs and Liberation Day, we're starting to see production move to the U.S. Antofagasta, a large copper miner, came out within the last two days and said they're looking for the administration's help to speed along a project in Minnesota that will mine both copper and nickel. We see other firms, Rio Tinto and Arizona, trying to get a copper mine up and running.

I think that's very telling from an investor standpoint, when you have threats of trade wars and potential for the global economy softening. These copper miners, who typically would be very sensitive to global economic conditions, are continuing to move forward with plans to invest and expand capacity in production. I think a lot of what that bears out is because we see this base floor of demand. Really, within the next 1-3 years or so, we're expecting the copper market to flip into a deficit. I think not only are companies looking at the long-term view and institutions and hedge funds looking at the longer-term dynamics in copper, but we're seeing investors start to take a look there.

What differentiates Sprott’s investing approach to critical materials?

John Kinnane: Although these are all unique stories, is it fair to say there's a common thread for the Sprott solutions? We're resource capacity-constrained in critical materials, and we now have an administration that seems supportive of hard assets.

Steven Schoffstall: I think that's exactly the case. Even if you were to take that a step further and look at precious metals, such as gold, production has not increased much in recent years. We're down about 3% over the last 5 or 10 years. Production has leveled off. We're seeing increased interest from central banks, but in the critical material space, something like copper that's been mined for almost all of human existence, uranium has been mined for about 100 years, and you're seeing a shift in how these resources are being used.

Investors, both institutional and at the company level, are realizing that we have to increase production. The difficulty with that is that it takes time. It's not something that we can make a large discovery of. We can't flip a switch and turn production on if we have a discovery. We're seeing investors lock on to that mid- to longer-term.

I think one of the benefits that we have at Sprott is that our investors tend to be very high-conviction. While we see that other investors might move money into or out of funds, our investors tend to have a much longer buy-and-hold approach to their investing. They understand the story, the market dynamics, and the opportunity there. From that standpoint, I think our investor base understands the long-term opportunity.

What do investors need to know about the uranium market?

Steven Schoffstall: One last question on the uranium space: with prices that have come down recently in the previous 8-12 months or so, how should investors be thinking about potentially entering a uranium trade, or if they already are invested in uranium, how should they be thinking about it in their portfolios?

John Kinnane: It's a good question, Steve. Two of the largest uranium producers out there—Cameco and Kazatomprom—have given guidance that, in the future, production will not have a big surplus. Demand is increasing concurrently, so it doesn't take a deep analysis to understand that with lower supply and higher demand, we're very positive on the price. Investors should also understand that there's a difference between what's going on in the spot market and the term market, meaning utilities are buying what they're using right now, and they've purchased years in the past. In contrast, the spot market is more of a current view on what's going on. It's worth looking at those dynamics as well.

Steven Schoffstall: I think many investors have been looking at this softening price over the last 12 months or so, and they're using this as an opportunity to add to a decision they've already made. In many cases, they feel like they missed that first leg up in what we believe to be a sustained bull market. We see investors now using that as a buying opportunity as they're thinking of adding uranium to a portfolio.

It's an interesting time for sure, I think, as we look at geopolitics and domestic politics and potential trade wars. One of the things I've always appreciated about commodity investing is that, for me, it's relatively black and white. You have a supply and demand. Other aspects go into that. But I think from an investment standpoint, it makes a lot of intuitive sense for me once you start pulling back the covers and looking at the underlying markets and what's going on from a supply and demand perspective.

How much of a portfolio can be allocated to precious metals and critical materials?

John Kinnane: One of the questions we often get from advisors is: How much should I buy, and what should I buy? It's just worth noting that within the gold perspective, exposure somewhere between 1% and 10% is going to improve your Sharpe ratios and risk-adjusted returns. Start with physical, and as your appetite goes up for increased returns but also volatility, it may make sense to go into equity-based exposure as well.

Steven Schoffstall: In the critical material space, many investors add that to their growth or energy bucket because it is very much thematic-like or an emerging industry, even though some of these metals have been mined for a long time. We do see some pockets of volatility, but if investors can stay focused on the mid-to-long term, we think that the supply and demand picture really plays out quite nicely.

John Kinnane: To ask for a direct recommendation, I know you and your team do a lot of work on new product construction. Is there a solution that covers some of these strategies, almost like an S&P 500 of metals and precious materials that investors should consider?

Steven Schoffstall: We have the Sprott Critical Materials ETF and ticker SETM. It exposes you to nine critical materials: silver, copper, and uranium. That's different than what you might see from other broader-based critical material ETF strategies, in that we focus part of the portfolio on uranium. Currently, it's about 20 or 25% of the fund.

The other differentiator versus broader-based strategies is that we apply the pure-play approach to all the underlying holdings. Say you're a silver miner. We're going to go through and the index methodology is going to go through and flush out who's a silver miner versus maybe a majority of copper miners, and take that into account through the selection process. In that regard, we've been very fortunate to partner with Nasdaq, which runs the indexes, and we have a great index relationship with them. It brings our background in the precious metals and critical material space with the indexing capabilities around which Nasdaq has built a reputation.