Silver ETF returns 59% in a year as industrial metals beat gold

Industrial metals have overtaken gold in 2026, with silver nearly tripling since early 2025 and copper funds drawing record inflows.

The iShares Silver Trust returned 58.7% over 12 months, while the United States Copper Index Fund gained 32%, as industrial demand drove prices higher.

"Historically, many investors have used silver in an effort to diversify their portfolios and manage inflation risk," Ryan Issakainen, senior vice president and ETF strategist at First Trust Advisors, said. First Trust on July 9 launched the FT Vest Silver Strategy & Target Income ETF, which uses options on the iShares Silver Trust to target annual income of about 4% above one-month Treasury securities.

Silver has nearly tripled since the start of 2025, with the iShares Silver Trust returning 150% in calendar 2025 alone, according to fund data. The Sprott Gold Miners ETF, by contrast, returned 40.1% over the past year. Copper has followed a similar trajectory, with LME three-month copper recently trading above $9,400 per tonne, supported by supply constraints from Chile's Codelco and declining treatment charges at Chinese smelters. Gold has more than doubled over the past two years as investors sought its inflation-hedging properties, but silver's 2025 rally of 150% has outpaced the yellow metal by a wide margin.

The divergence between industrial and precious metals reflects a structural shift in demand. Silver's dual role — monetary hedge and industrial input for solar panels and electronics — gives it a demand profile gold lacks. Copper, essential for electrification and data center buildout, faces a supply deficit that analysts at Goldman Sachs have projected could persist through 2028. The next signal for both metals is the Chinese PMI release later this month, which will indicate whether industrial demand from the world's largest metals consumer is accelerating.

Silver's 150% Rally in 2025 Reshapes ETF Flows

The iShares Silver Trust, with $28.6 billion in assets under management, has become the primary vehicle for investors seeking physical silver exposure without the storage costs of bullion. The fund's 0.50% expense ratio reflects the cost of vaulting and insuring physical metal. By comparison, the Sprott Gold Miners ETF charges 0.46% and holds 39 positions including Agnico Eagle Mines at 9.3%, Barrick Mining at 7.8%, and Newmont at 7.1%.

Over five years, $1,000 invested in SLV grew to $2,184, while the same amount in SGDM reached $2,279 — nearly identical annualized returns of about 16%. But silver's maximum drawdown over that period was 51%, versus 45% for gold miners, reflecting the metal's higher volatility. For tax-sensitive investors, gains from physically backed silver ETFs are classified as collectibles in the U.S., typically subject to a higher capital gains rate than equity-based funds like SGDM, which also offers a dividend yield of 1.10%.

Copper Supply Gap Widens as Demand Accelerates

The United States Copper Index Fund has gained 32% over the past year as LME warehouse stocks fell to multi-year lows. Chilean copper output dropped 8% year-over-year in early 2026, according to exchange data, while Chinese smelter treatment charges declined to about $25 per tonne, pointing to tightening concentrate supply. The SPDR S&P Metals & Mining ETF, which holds a diversified basket of mining equities, has also benefited from the rotation into industrial commodities.

First Trust's new SLVY fund offers a third approach: using options on SLV to generate income while capping upside participation. The fund targets an annual income level of about 4% above one-month Treasury securities, managed by Vest Financial LLC, which oversees more than $68 billion in assets under management or supervision.

The rotation into industrial metals has implications beyond commodity ETF returns. Mining companies with exposure to silver and copper stand to benefit from both higher spot prices and expanding margins as production costs remain relatively fixed. For investors, the choice between physical metal ETFs like SLV, equity-based funds like XME, and income-oriented structures like SLVY increasingly depends on whether they prioritize direct price exposure, dividend income, or tax efficiency.

This article is for informational purposes only and does not constitute investment advice.