Other segments of the commodity market such as natural gas, oil and agriculture, have underperformed relative to those precious metals.
Industry experts say commodity ETFs can be good portfolio diversifiers, but they warn that not all are created equal and there’s some information asymmetry in the space that investors should consider.
“Investing in commodities is challenging. It’s not for inexperienced investors,” said Jeffrey Schok, senior portfolio manager, North American and global equities with RBC Global Asset Management in Toronto. He manages the RBC Global Precious Metals Fund, which is available in mutual fund series and an ETF series (Cboe: RGPM).
“That’s why I really think that mutual funds or active ETFs are the way to go for the average investor,” he said. “Get someone who knows what they’re doing to manage money and take advantage of a team that has a good track record over time.”
What’s driving investor demand?
Schok said there’s been “one overriding factor” that had the biggest impact on commodities in general, and gold specifically, this year: Donald Trump.
“His presidency [and] tariff policies basically completely upended and disrupted what last year we would have said were pretty well-functioning, efficient commodity markets — markets where you could find something or produce it in one area, and ship it to where needed in a different country with very low barriers, very low cost,” he said.
“Trump has turned all of that on its head.”
Trump’s tax cuts and spending plans have also increased the U.S. government’s deficit, which could have potential long-term impacts on U.S. debt, while his attacks on the Federal Reserve have created uncertainty about how U.S. monetary policy will be enacted in the future, Schok said.
“You take all of these factors together, and basically what Trump’s done is he dented confidence in the U.S. and the world’s largest economy,” he said.
That’s led concerned investors and central banks to diversify their own foreign reserves away from U.S. Treasuries and “scramble to get their hands on gold,” which is negatively correlated with stocks and bonds and tends to retain value when markets go sideways, Schok added.
ETFs that provide exposure to gold have benefited, said Nawojka Wachowiak, a senior portfolio manager with Ninepoint Partners LP in Toronto. She manages several funds, including the Ninepoint Gold & Precious Minerals Fund (TSX: GLDE).
“As a whole, the complex is definitely gaining more traction” she said, noting that gold’s been on an upswing since 2024, driven by inflation concerns, central bank demand and geopolitical uncertainty. “And then the gold ETFs are definitely gaining momentum in terms of inflows.”
Wachowiak sees more room for growth among gold ETFs.
“Really, when you look at the ETF holdings, we still have a lot of room to move. We are still well below the levels we saw in 2022, during the height of Covid,” she said.
Silver, which functions as both a safe-haven asset and a vital commodity for manufacturing, is also drawing investor attention this year.
“With the gold rally, people are starting to look at silver,” Wachowiak said.
“It took a long time for silver to really get kicked off, and now we’re sort of seeing it come to life.”
Marc-André Lewis, president and chief investment officer of CI Global Asset Management in Toronto, shared similar remarks. His firm offers four commodity ETFs, including the CI Gold+ Giants Covered Call ETF (TSX: CGXF, CGXF.U), CI Gold Bullion Fund (TSX: VALT, VALT.B, VALT.U), CI Energy Giants Covered Call ETF (TSX: NXF, NXF.B, NXF.U) and CI Auspice Broad Commodity Fund (TSX: CCOM).
“When you get strong demand for gold, and silver looks historically cheap relative to gold, on that ratio, it tends to bring a lot of demand for silver,” he said.
Other commodities have underperformed by comparison.
The demand for gold especially “gives the impression the whole commodity complex is doing well,” Lewis said, “and when you go below the surface, it’s not as obvious.”
The Goldman Sachs Commodity Index, which includes a broad basket of commodities, was flat year-to-date through the end of October.
This underlines how some commodity ETFs have done better than others in 2025.
“Commodity ETF flows tend to correlate with the price of the underlying commodity,” said Tiffany Zhang, director of ETF research and strategy with National Bank Financial in Toronto.
“For example, gold ETFs experienced record levels of inflows in the most recent two years, in tandem with the gold price reaching new highs.”
Investor considerations
There are several considerations investors should make when they choose to incorporate commodity ETFs into their portfolios.
For one, there are three types of commodity ETFs — those that invest in futures contracts, indices and directly in physical assets.
Investors need to do some homework to understand which type of fund they’re investing in and how it matches with their goals and risk tolerance, said Karl Cheong, partner, executive vice-president, head of ETFs with Ninepoint Partners in Toronto.
“One of the mistakes I’ve seen investors [make] is … they don’t fully understand the risk-return metrics of a particular strategy that’s being offered,” he said.
“Sometimes there are several gold funds, and then you have to take a look under the hood … because there could be some disconnect from the actual gold price or the gold bullion. So, there’s a little bit more than just reading the headline.”
It’s also worth noting that investing in a gold bullion or silver bullion ETF can be easier and cheaper than directly holding the precious metals, considering storage, insurance and transaction costs.
“In our view, physical commodity ETFs are in some ways even safer than holding ‘real’ gold or silver bars because the ETF handles the safeguarding and insurance process for you,” Zhang said.
“But there’s no doubt there are some ‘gold bugs’ out there who have always doubted the presence of physical gold in these products.”
Further, unlike many stocks and fixed-income securities that provide ongoing yield, commodity ETFs mostly do not provide any distributions, Zhang noted. However, some funds will employ a covered-call strategy “to help solve the no-income issue at the expense of some upside during a gold rally,” she said.
Another point to consider is that some commodities are more cyclical in nature and their performance depends on supply and demand. For example, agriculture can be heavily influenced by weather, planting seasons and government policies, while energy markets depend on Organization of the Petroleum Exporting Countries decisions, production levels and geopolitics.
“What you have to remember with commodities is that it is a cyclical market. You go through the typical patterns — boom, peak, bust, trough,” Schok said.
“So, there are times when you want to be invested in it. There are other times when you want to stay far away. And it’s not really for the faint of heart. There is volatility.”
Lewis agreed, saying there’s a fair bit of information asymmetry in the commodity market.
“You’re investing in a space that has a lot of very, very specialized experts, right? Trying to time the market is difficult in general,” he said.
Still, commodity ETFs can provide diversification benefits to a portfolio primarily composed of stocks and bonds, especially during equity market drawdowns.
“I think they provide interesting diversification so that a sleeve of commodities, and I mean like 5%, 10%, probably makes sense in a lot of investors’ portfolios,” Lewis said.
“If you go beyond that, then you really need to start to understand the additional risk you’re taking, and also if your level of knowledge of that space is enough to justify such a weight.”
This article appears in the November 2025 issue of Investment Executive. Read the digital edition or read the articles online.