As market volatility escalates and geopolitical tensions mount, financial advisors face the challenge of finding resilient investment solutions for their clients. Critical materials and precious metals have emerged as potentially valuable portfolio components in uncertain markets, offering both defensive qualities and growth potential. Against this backdrop, Sprott provides tailored exchanged-traded funds (ETFs) focused on silver, gold, uranium, and a broad range of critical materials.
In an interview with The Wealth Advisor’s Scott Martin, Steve Schoffstall, Director of ETF Product Management at Sprott, discussed how market volatility, tariffs, and potential trade wars are shaping investment approaches to critical materials and precious metals, highlighting the Sprott critical materials ETFs for forward-thinking advisors and their clients.
Market Sentiment: Uncertainty May Drive Decision-Making Paralysis
The current market—buffeted by tariffs, the threat of trade wars, and additional volatility factors—presents a challenging environment for decision-making. According to Schoffstall, conversations with investors reveal that “most investors are concerned about market volatility and what that means for not just commodity markets but markets in general.”
Specifically, “in a lot of cases, what we find is that the uncertainty is actually worse than bad news because people don’t know how to react,” he adds. “Oftentimes, what that does is cause some paralysis in the market.”
When investors freeze amid uncertainty, opportunities may arise for strategic positioning in sectors with strong fundamentals. Sprott’s specialized ETF suite aims to allow advisors to help clients navigate volatility by gaining exposure to critical materials and precious metals with long-term growth potential.
Critical Materials: A Forward-Looking Foundation
Even as broader markets experience turbulence, critical materials are set to benefit from structural demand growth that offers long-term growth potential. The massive global investment in energy transition establishes a consistent demand floor regardless of short-term economic fluctuations, Schoffstall says.
“If you look at critical materials, they’re probably in a much better spot than they were five or 10 years ago,” he observes, noting that the scale of commitment to energy transition investments has accelerated dramatically. “Last year, we had over $2 trillion invested globally. It took about 18 years for the investments to reach $1 trillion. It only took about three years for us to surpass $2 trillion.”
This rapid acceleration of capital deployment to unprecedented levels signals the strengthening commitment to energy transition initiatives worldwide, creating sustained demand for critical materials.
Diverse Materials, Diverse Opportunities
Sprott classifies critical materials into three functional categories that can help advisors understand their role in the energy transition: energy generation, transmission, and storage. Each category represents specific opportunities and demand dynamics.
For energy generation, materials such as uranium and silver play crucial roles. Schoffstall highlights uranium’s unique position as an energy commodity with demand insulated from economic cycles.
“Uranium is one of those materials that doesn’t really go at the whims of the market because there’s a base level of uranium that’s needed to continue producing energy,” he says. “From that standpoint, it’s not really impacted by the broader market and what’s going on with the global economy.”
Silver occupies a unique position as both a precious metal and an industrial commodity. “About 55% of silver is now used for industrial purposes,” Schoffstall reveals. “When you think about the energy transition, we’re seeing a significant growth in the silver demand coming from solar panels, which has increased from about 6% of overall silver demand 10 years ago to about 16% today.”
The transmission category centers primarily on copper, which has been traditionally correlated to global economic health but is now attracting additional demand from grid development and renewable energy infrastructure, he explains. For energy storage, battery metals such as lithium, nickel, cobalt, graphite, and manganese represent key components of the energy transition, with demand tied to electric vehicle adoption and stationary storage growth.
By understanding various roles within the energy transition ecosystem, advisors may strategically allocate client assets across different categories based on their outlook for specific technologies and applications, aiming to capture growth across multiple routes of the clean energy transformation.
Supply Constraints May Enhance the Investment Case
Many critical materials face ongoing supply challenges that strengthen the case for considering them in portfolio construction, Schoffstall says. Silver stands out as a prime example, given consistent supply shortfalls: “Each of the last six years, silver has been in a supply deficit. So, we’re using more silver than what’s being mined.”
Logistical limitations for silver stem from its production dynamics, with approximately 72% mined as a byproduct of other metals. “That makes it very difficult for supply to increase naturally because if it’s being mined as a byproduct metal, the miners are going to focus on whatever their primary metal is, and they’re not going to let the tail wag the dog in certain respects when it comes to mining silver,” Schoffstall says.
Because silver production is secondary to the mining of other metals, producers don’t increase silver output even when prices rise, creating persistent supply restrictions. For investors, this supply-demand imbalance suggests potential upward price pressure over time, as industrial demand continues to grow while supply remains relatively constrained.
Similar supply chain challenges exist across various critical materials, Schoffstall notes, particularly those facing geopolitical pressures or concentrated production geographies. The combination of growing demand and structural supply limitations might create a compelling case for strategic portfolio allocations to the sector.
Targeted ETF Options for Strategic Exposure
Sprott offers several specialized ETFs designed to build tailored exposure based on market outlook and client needs. The recently launched Sprott Silver Miners & Physical Silver ETF (ticker: SLVR) represents a two-sided approach to silver investing.
“SLVR mainly provides focused exposure to those pure-play miners as well as physical silver,” Schoffstall states. “It’s very much differentiated in the market, and in the two months since launch, we’ve seen a lot of investor activity in that fund and a very good uptake right out of the gates.”
SLVR stands out in the market by combining physical silver with miners generating at least 50% of their revenue or assets from silver, offering investors both direct commodity exposure and operational leverage to silver prices. The strategy might serve as both a precious metal hedge and an industrial growth play, given silver’s dual role.
For investors who value active management in the precious metals space, the Sprott Active Gold & Silver Miners ETF (ticker: GBUG) stands out as the only actively managed ETF focused specifically on gold and silver mining companies. This Sprott strategy offers the ability for advisors and their clients to benefit from Sprott’s decades of specialized expertise in a sector where operational complexities make company selection particularly important.
“When you look at the mining space, it really lends itself to active management,” Schoffstall explains. “Generally, what you see is, across the various miners, it’s very much an operationally complex endeavor to be involved in mining.”
To identify the most promising opportunities, Sprott’s investment team conducts “more than 200 management team meetings each year” and “up to 30 site visits a year,” he adds, allowing them to evaluate crucial factors such as operational efficiency, resource quality, and management capabilities that can significantly impact mining company performance.
“That gives them a unique perspective on both the gold and silver market, and I think that’s why we’ve seen investors really turn up for that fund as well,” Schoffstall notes.
For exposure to uranium, another critical material for energy, Sprott offers the Uranium Miners ETF (ticker: URNM). URNM is focused on companies involved in uranium mining, exploration, development, and production, as well as companies that hold physical uranium or uranium royalties. With nuclear power gaining recognition as a low-carbon source of baseload electricity, URNM aims to leverage a potential beneficiary of clean energy policies.
Advisors seeking broader exposure across the critical materials spectrum might consider the Sprott Critical Materials ETF (ticker: SETM), which is designed to provide diversified exposure to up to nine different critical materials through mining companies, Schoffstall explains. SETM offers a comprehensive approach for those who prefer not to take specific positions on individual commodities, at the expense of some others within the critical materials sector.
“We find investors that don’t want to pick the winners and losers between say, silver and lithium and nickel or uranium tend to prefer a broader-based approach,” Schoffstall notes. “We’re seeing a lot of interest in that as we’re coming off a period where prices have been somewhat depressed. We think many investors are viewing this as a buying opportunity across the critical materials space.”
Each ETF in Sprott’s lineup aims to serve a distinct purpose in portfolio construction, allowing advisors to tailor exposure based on macroeconomic outlook, risk tolerance, and specific client needs. By offering both targeted sector strategies and broader exposure options, Sprott enables advisors to potentially implement a nuanced approach to navigating uncertain markets.
Mining Valuations Present Opportunity
Despite positive market fundamentals, miners across both precious metals and critical materials sectors appear undervalued relative to their earnings potential. Regarding gold miners specifically, Schoffstall observes that they “tend to be less leveraged” and “tend to have a higher dividend yield” compared to the S&P 500. These relative financial strengths position gold miners as potentially attractive investment options, offering robust balance sheets and compelling income potential compared to those of many other market sectors.
Going forward, these miners show significant growth potential. “If you look at earnings expectations through the next two years, we’re seeing 67% expected growth in 2025 and then 99% in 2026,” Schoffstall notes, adding that “the prices of and valuations of silver miners haven’t really kept up with that level of growth.”
The valuation disconnect represents potential opportunity for advisors and their clients, particularly given the historical outperformance patterns of silver miners during precious metals bull markets.
Turbulence as Opportunity
While market volatility creates challenges, it also presents strategic entry points for long-term investment strategies.
“In our view, silver is a great way to kind of play both the precious metals, so you get the added potential benefit or insurance policy, but also still participate in the critical materials side of the investment landscape,” Schoffstall says.
For advisors guiding clients through uncertain markets, Schoffstall emphasizes a balance between caution and opportunity. “There is a lot of uncertainty out there, but I do think there’s also a lot of opportunity that comes with that uncertainty,” he explains.
Sprott’s suite of specialized ETFs offers financial advisors multiple avenues to potentially capitalize on both market uncertainty and long-term structural demand growth. From the dual-purpose approach of SLVR to the broad exposure of SETM and the active management of GBUG, Sprott’s critical materials ETFs seek to provide a strategic edge during volatility, aiming to balance defensive risk mitigation with exposure to growing clean energy demand.
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Additional Resources
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Important Disclosures
An investor should consider the investment objectives, risks, charges, and expenses of each fund carefully before investing. To obtain a fund’s Prospectus, which contains this and other information, contact your financial professional, call 1.888.622.1813 or visit sprottETFs.com. Read the Prospectus carefully before investing.
Exchange Traded Funds (ETFs) are considered to have continuous liquidity because they allow for an individual to trade throughout the day, which may indicate higher transaction costs and result in higher taxes when fund shares are held in a taxable account.
The funds are non-diversified and can invest a greater portion of assets in securities of individual issuers, particularly those in the natural resources and/or precious metals industry, which may experience greater price volatility. Relative to other sectors, natural resources and precious metals investments have higher headline risk and are more sensitive to changes in economic data, political or regulatory events, and underlying commodity price fluctuations. Risks related to extraction, storage and liquidity should also be considered.
Shares are not individually redeemable. Investors buy and sell shares of the funds on a secondary market. Only market makers or “authorized participants” may trade directly with the fund, typically in blocks of 10,000 shares.
The Sprott Active Gold & Silver Miners ETF and the Sprott Silver Miners & Physical Silver ETF are new and have limited operating history.
Gold and precious metals are referred to with terms of art like store of value, safe haven, safe asset and insurance. These terms should not be construed to guarantee any form of investment safety or insurance. While “safe” assets like gold, Treasuries, money market funds and cash generally do not carry a high risk of loss relative to other asset classes, any asset may lose value, which may involve the complete loss of invested principal.
Sprott Asset Management USA, Inc. is the Investment Adviser to the Sprott ETFs. ALPS Distributors, Inc. is the Distributor for the Sprott ETFs and is a registered broker-dealer and FINRA Member. ALPS Distributors, Inc. is not affiliated with Sprott Asset Management USA, Inc.
