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NewsMint MoneyREITSMetal ETFs shine in uncertain market: Should you invest now?The performance of metal ETFs depends on
the state of the economy, as they invest in industrial metals. While they are expected to grow during economic
expansion, they carry more risk than gold and silver ETFs. Allirajan MuthusamyPublished25 Jul 2026, 09:00 AM ISTGold and
silver are safe-haven assets and act as a hedge against inflation. But the fortunes of basic metals depend heavily on
economic growth.(REUTERS)AI Quick ReadGold and silver exchange-traded funds (ETFs) have captured the imagination of
investors with their stellar performance in recent months. While gold and silver ETFs have been riding high on the sharp
rally in the prices of these commodities, another category in this space has also delivered strong returns.Metal ETFs,
which invest in a diversified range of companies engaged in the metals business, including steel, copper and aluminium,
are among the best performers in the last one year. They have gained more than 32% on average in the one-year timeframe
on a Compounded Annual Growth Rate (CAGR) basis, trailing only gold and silver ETFs in the performance chart. Here is a
guide to metal ETFs, the reasons for their recent outperformance and how they compare vis-à-vis other asset
classes.Metal ETFs: What are the reasons for their recent outperformance?Metal ETFs invest in a range of widely used
metals such as steel, copper and aluminium. Since they invest in a diversified range of metals, their ‘concentration
risk’ is low compared to similar products. Any steep fall in the prices of a specific metal will not adversely affect
the returns of the ETF, as the exposure to it will be limited.Also Read | Average gold loan doubles to ₹1.96 lakh in 3
years as gold prices surgeThese ETFs have gained traction in recent months due to a host of factors. “The recent
strong performance of metal ETFs can be attributed to several factors, including the improvement in global industrial
demand, the expectation of increased spending on infrastructure projects, and constraints on the supply side of major
basic metals such as copper,” said Mukesh Pandey, Founder and MD, Rupyaapaisa.com, a financial consultancy.NEW SHINE
Fund Name6-month returns (%)1-year returns (%) Mirae Asset Nifty Metal ETF9.331 ICICI Prudential Nifty Metal ETF931
Groww Nifty Metal ETF9.2NA Nifty Metal TRI8.731.8 “Metal ETFs have delivered a steady return of nearly 35% over the
past year, supported by a combination of favourable macroeconomic and commodity-specific factors,” said Jateen
Trivedi, Research Analyst — Commodity and Currency, LKP Securities. “The rally has been driven by higher prices in
industrial metals such as copper, aluminium and steel, supported by improving global manufacturing activity,
infrastructure spending, and supply-side constraints in key producing regions,” he said. “Additionally, the
depreciation of the Indian rupee has amplified domestic returns, as most industrial metals are globally priced in US
dollars,” he said.How do they compare as an investment option vis-a-vis gold and silver ETFs?Gold and silver are
safe-haven assets and act as a hedge against inflation. They also help investors navigate uncertain times. But the
fortunes of basic metals depend heavily on economic growth. “Unlike gold and silver ETFs, which primarily act as
safe-haven and inflation hedges, metal ETFs are cyclical and closely linked to economic growth and industrial demand,”
said Aditya Agrawal, Chief Investment Officer, Avisa Wealth Creators, a wealth management platform. “They offer higher
return potential during expansionary phases but also come with greater volatility,” he said.Also Read | 5 red flags
investors should watch out for before choosing a financial product“Gold ETFs are mainly used as a hedge against
inflation, devaluation of currencies, and an uncertain market environment, while silver ETFs combine features of a
safe-haven asset with a good demand from industry,” Pandey said.“ETFs investing in industrial metals such as copper
and steel are connected to the level of economic growth,” he said. “The performance of metal ETFs is based on
whether or not the economy is flourishing, as they invest in industrial metals. While they are expected to grow during
economic expansion, they carry more risk than gold and silver ETFs,” said Piyush Jhunjhunwala, CEO and Founder,
Stockify, which offers access to unlisted shares for retail investors.How much (in percentage terms) can investors have
metal ETFs in their portfolio?Investment advisors recommend an allocation of only around 5% of the total portfolio to
metal ETFs for average investors. “For most investors, a 5%–10% allocation to metal ETFs is adequate as a tactical
diversification tool. The core commodity allocation should continue to remain tilted towards gold and, to a lesser
extent, silver,” Agrawal said.“The average retail investor’s allocation in the form of industrial metals ETFs
usually ranges from 5%-10% in a well-diversified portfolio,” Pandey said. “Conservatively minded investors commonly
restrict their holdings to 3%–5% while those more accustomed to risks, viewing the global (industrial) cycle
positively, may lean on holdings as high as 10%–15%,” he said.“The division must be based on the investor’s risk
exposure, time period, and other commodities already owned. Investors should avoid the tendency to concentrate their
investments and limit their exposure to commodities due to the cyclical nature and volatility of the sector,” Pandey
said.What is the outlook for metal ETFs and will they be able to sustain the current momentum?The long-term outlook for
metal ETFs is bright as the global demand for industrial metals is expected to stay strong due to the development of
infrastructure projects and clean technologies, experts said. Short-term returns may remain volatile due to the impact
of interest rates, economic development, and other factors, they said.Also Read | India’s suspected digital fraud rate
soars to twice the global average“The metals sector plays an important role across infrastructure, manufacturing, and
several emerging areas of the economy, and these products can offer investors an efficient means of gaining exposure to
this sector,” said Navneet Munot, MD and CEO, HDFC Asset Management Company (AMC). HDFC has just launched the HDFC
Nifty Metal ETF and the HDFC Nifty Metal ETF FOF (Fund of Funds), joining the small club of metal ETFs.“India's metals
sector is potentially poised to benefit from sustained infrastructure spending, manufacturing expansion and rising
demand from renewable energy, electric vehicles, artificial intelligence and data centres,” HDFC said.Gold ETFsMetal
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