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Five gold rings? I’d rather have silver
Moira O’Neill

Demand for rare metals is likely to soar over the next 10 years

All I want for Christmas is silver, copper and uranium rings . . . plus, maybe, some recycled gold.

When gold plunged to $1,355 in April 2013 financial advisers lined up to warn me that the metal was “just speculation” and “not a traditional investment” because it didn’t pay an income. But all I should have asked for at Christmas in 2013 was the investment equivalent of five gold rings: shares in iShares Physical Gold. Ten years later I would have doubled my money, as gold passed $2,000 to reach record highs.

Fortunately, I haven’t missed out on all of these gains, as I hold about 5 per cent of my pension in gold for its unique profile. It has a historically low correlation with other asset classes and acts as “insurance” during falling markets and times of geopolitical stress.

But thinking over the next 10 years, should I — and others who hold gold — pocket some of our gains and diversify into other metals, particularly in light of the demand for rare metals promised by this month’s COP28 agreement

Silver may be best placed to add some extra shine to a portfolio. Not only is it a precious metal with a history of coinage, but it is used in photovoltaic (or solar) energy. Victoria Scholar, head of investment at UK broker Interactive Investor, says: “Gold has fared better than silver lately because of gold’s safe haven properties. But this means that silver is more undervalued than gold, potentially providing an opportunity for fundamental investors.”

Ned Naylor-Leyland, manager of the Jupiter Gold and Silver fund, warns that silver’s structural supply issue is also “very frustrating”. “You can see silver leaving London and going abroad. Indians are very keen on silver for jewellery. Solar panel demand is off the scale — you can’t satisfy the demand. Sadly, it doesn’t drive the price in the short term,” he says.

Silver tends to move together with gold, while typically being more volatile, coming with greater risk but potentially more rewards. Naylor-Leyland says the ratio of silver to gold being mined is 12:1, but the price ratio was 120:1 during the Covid pandemic. Today’s silver pricing at 80:1 makes it potentially an “interesting entry point” and if there’s a delivery failure its price could rocket. That’s good enough for me.

I don’t want the hassle of insuring and storing silver, apart from holding on to the silver spoon collection grandma left to me. So I’ll buy shares in an exchange traded product that produces returns in line with the physical silver spot price, by holding silver bullion in the vaults of the custodian bank, with each share corresponding to a specific quantity of the underlying silver.

Looking at the most popular customer holdings on Interactive Investor it’s a toss-up between the Wisdomtree and iShares Physical Silver ETCs. I prefer the iShares one for its lower management fee of 0.2 per cent.

Beyond silver, other metals are “commodities” that can diversify against equity performance and act as a store of value while inflation erodes the value of paper currency. But you need to be careful how you buy and hold them.

Because of its efficiency as an electricity conductor, copper is instrumental in the global push to reach net zero emissions. Tom Bailey, head of ETF research at HANetf. a fund provider, says: “Copper’s use in electricity grids, electric vehicles and renewable energy technologies means the energy transition is leading to a potentially huge expansion in copper demand.”

According to Goldman Sachs, just 4 per cent of copper consumption in 2020 was allocated to green uses. By 2030, that is expected to rise to 17 per cent. Goldman Sachs also estimates that copper demand will reach 60mn tonnes by 2030.

Prices have already moved higher. Scholar says: “Copper gained around 10 per cent from the trough in October to the peak at the start of December. It looks as though the downtrend from the highs in 2022 is starting to show signs of reversing.”

Pure exposure to copper is available through WisdomTree’s Copper ETF, which charges 0.49 per cent. But copper miners may be a better strategy: historically, they have outperformed the spot price of copper. Naylor-Leyland says: “While mining equities in gold and silver have been struggling throughout my career, copper and iron ore miners generally are very robust and pay good dividends.” They appear to make sense on a value basis, he adds.

This points to investing in a basket of UK and overseas stocks. Russ Mould, investment director at AJ Bell, says: “Leading copper miners listed in the UK include Antofagasta and Central Asia Metals, while Anglo American, Rio Tinto and Glencore are more diversified producers with exposure to other commodities. BHP’s main listing is now Sydney, but it is also a top 10 global producer, while the biggest copper miner of all is America’s Freeport-McMoRan.”

UK investors may already hold some of the bigger miners via diversified equities funds. If not, I like the look of the new Sprott Copper Miners ESG-Screened UCITS ETF, although there’s quite a steep total expense ratio of 0.69 per cent. I’m also considering BlackRock World Mining, which will capture the trend, but leave the decisions to the professionals. It’s trading on a discount of 5 per cent (after being on a premium in the first half of 2023) with a tasty dividend yield of 7 per cent.

Uranium is the third metal on my shopping list. Those wanting direct exposure to the metal could look at Yellow Cake, an investment vehicle on London’s AIM market, and Toronto-quoted uranium miner Cameco. The Sprott Physical Uranium Trust fund is also designed to track price movements.

But the investment case is not so clear cut. Luke Hyde Smith is co-head of Multi-Asset Strategies at investment manager Waverton, which gains exposure by investing via the Global X Uranium UCITS ETF. He says: “Uranium has performed strongly this year, so one can’t rule out a period of consolidation or profit taking.”

Nevertheless, I’m tempted by a holding in the Geiger Counter investment trust, which offers exposure to a range of uranium miners and holds 5 per cent in the Sprott fund. It can be bought at a 13 per cent discount to its portfolio’s underlying net asset value, which feels like an opportunity.

All of these metals — silver, copper and uranium — could receive a boost from the pledges on renewable and nuclear energy at COP28. The elephant in the room was the enormous demands these pledges will make on already scarce metals with valuable industrial uses that gold simply doesn’t have.

In the meantime, I’m reviewing my gold exposure. I’ve become a fan of Monica Vinader, the recycled jewellery maker, and I’m hoping Santa will bring me a smallish something from there for Christmas. 

About 40 per cent of the bars backing the Royal Mint Responsibly Sourced Physical Gold ETC are made from recycled gold. That will help match my investments to my jewellery principles.  

Moira O’Neill is a freelance money and investment writer. X: @MoiraONeill, Instagram @MoiraOnMoney, email: moira.o’[email protected].




Moira is an independent freelance investment and money journalist. She was previously head of content at interactive investor, editor at Moneywise, personal finance editor at Investors Chronicle and deputy editor at Money Observer. She has won a Wincott Journalism Award and written two personal finance books, Finance at 40 and Saving and Investing for Your Children.

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