Will 2025's Metal-Focused ETFs Continue to Deliver in 2026?

The year 2025 has been a watershed for metal-focused exchange-traded funds (ETFs), with many outperforming traditional asset classes. Precious metals, in particular, have surged: the iShares MSCI Global Silver and Metals Miners ETF (SLVP) gained 212%, while the Amplify Junior Silver Miners ETF (SILJ) rose 195%. Gold prices climbed 71% year-to-date, driven by geopolitical tensions. Industrial metals like copper and lithium also saw robust returns, with copper up 43.93% and lithium rising 64.61%, reflecting their critical roles. As investors now look ahead to 2026, the question is whether these gains can be sustained-and whether metal ETFs remain a strategic component of long-term portfolios.

Strategic Materials Demand: The Engine of Growth

The outlook for 2026 hinges on the accelerating demand for strategic materials, driven by three interlinked forces: the energy transition, AI infrastructure expansion, and geopolitical supply-chain reconfiguration. Industrial metals such as copper, aluminum, and tin are central to renewable energy systems, electric vehicles (EVs), and grid modernization. The International Copper Study Group forecasts a refined copper shortfall of 150,000 tonnes in 2026, with prices potentially reaching $13,000 per ton by year-end, fueled by AI data center construction and electrification trends. Similarly, rare earth metals and lithium, essential for batteries and green technologies, are seeing heightened investment, particularly in North America and Australia, as nations seek to reduce reliance on China.

Precious metals, too, are poised for continued strength. Silver's supply deficit is expected to persist in 2026 due to surging demand from solar panels and 5G infrastructure. Gold, meanwhile, has benefited from central bank demand-global reserves increased by 60% in 2025-and remains a hedge against currency devaluation and geopolitical instability. These dynamics suggest that metal ETFs, whether focused on industrial, strategic, or precious metals, are well-positioned to capture structural demand shifts.

Challenges and Risks in 2026

Despite these fundamentals, metal-focused ETFs face headwinds. One key risk is overvaluation. For instance, the SIL ETF (silver producers) has a price-to-book (P/B) ratio of 4.2x, far above its 2024 level of 1.5x, raising concerns about a potential pullback. Macroeconomic uncertainties also loom large: while global growth remains resilient, inflationary pressures could resurge if central bank rate cuts stimulate demand without corresponding supply-side adjustments. Stagflation-a scenario of stagnant growth and rising inflation-could pressure commodity prices and ETF valuations.

Supply constraints further complicate the outlook. Silver's industrial demand, driven by solar and EVs, is outpacing mine production, creating structural deficits. If demand slows or supply increases unexpectedly, price corrections could occur. Geopolitical tensions, while historically boosting safe-haven assets like gold, also introduce volatility. A moderation in conflicts or trade disputes could reduce demand for these metals as hedges.

Long-Term Portfolio Relevance: Diversification and Risk-Return Tradeoffs

Beyond 2026, metal ETFs offer compelling diversification benefits for long-term portfolios. Gold, for example, has historically outperformed traditional assets over two decades and serves as a hedge against systemic risk and inflation. Industrial metals like copper and silver, with their low correlation to equities, can stabilize portfolios during market downturns. By 2030, the energy transition and AI infrastructure will likely deepen demand for these materials, reinforcing their strategic value.

Comparative risk-return analysis also favors metal ETFs. Traditional 60/40 portfolios face elevated risks due to high valuations and equity-bond correlations, prompting a shift toward commodities for diversification. A 10-15% allocation to commodities can reduce volatility while maintaining return potential. However, investors must remain cautious about leveraged or inverse ETF structures, which amplify volatility and tracking error.

Conclusion

The performance of 2025's metal-focused ETFs reflects a confluence of strong fundamentals and structural demand shifts. While 2026 will test their resilience amid valuation concerns and macroeconomic uncertainties, the long-term outlook for strategic materials remains robust. As the energy transition and AI infrastructure drive demand, metal ETFs will continue to play a critical role in diversified portfolios, offering both inflation protection and exposure to industrial and technological progress. Investors who balance these opportunities with prudence in risk management are likely to find metals a compelling asset class in the years ahead.