Where next for one of 2025’s best-performing investments?

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Commodities have been one of the hottest investment areas of 2025, with both gold and silver prices soaring. To explain why commodities are in a bull market, and to examine future prospects, Kyle is joined by Olivia Markham, co-manager of BlackRock World Mining Trust Ord (LSE:BRWM). 

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Kyle Caldwell, funds and investment education editor at interactive investor: Hello, and welcome to the latest episode of On The Money, a weekly show that aims to help you make the most out of your savings and investments.

In this episode, we’re going to focus on one of the hottest investment areas of 2025, commodities.

We’ve seen the price of various commodities perform very well this year, and in particular, gold has soared. However, the bull run for gold has actually taken place over the past two years, [during] which the gold price doubled from $2,000 per ounce to around $4,000 per ounce.

In this episode, we’re going to mainly focus on gold, and the outlook for gold, and we’ll also examine other commodities.

Joining me to discuss this topic is Olivia Markham, co-fund manager of BlackRock World Mining Trust.

So, Olivia, I want to start with the gold price. It’s risen substantially so far in 2025, but that bull run actually started around 18 months or two years ago.

Various suggestions have been put forward to explain why the gold price has been shining, including geopolitical tensions, and the weakness in the US dollar. For you, what are the main reasons behind this bull run for gold?

Olivia Markham, co-fund manager of BlackRock World Mining Trust: As you say, there’s been a number of factors. But if I was trying to boil it down to one, I think it comes back to the currency aversion trade and that concern people have around risk of traditional fiat currencies.

We’ve seen increasing fiscal deficits, particularly in the US. We’ve had concerns around where inflation goes to longer term. You pointed to geopolitical risk. We see central bank buying. When that all kind of boils down, what is that true safe-haven investment now?

I think many people are going back to gold as that, given that some of the pressures on some of those other more traditional safe havens, be it the dollar, be it US treasuries. When you pull all that together, it’s resulted in quite an incredible market for gold this year.

Kyle Caldwell: You mentioned central bank buying. That really has been a key driver. Is that because central banks are diversifying a bit away from the US dollar and then increasing exposure to gold?

Olivia Markham: We also really need to remember that decisions made by central banks are very long-term decisions. We saw a change in the behaviour of central banks about three years ago. We’ve effectively seen central banks double their exposure to gold within their foreign reserves.

I think part of it is around diversification. It’s thinking back to those comments around what is that true, long-term, safe-haven investment. We continue to see central banks globally increase their reserves of gold.

Kyle Caldwell: Now, while I know that you don’t have a crystal ball and it’s impossible to predict the future direction of any asset, stock market, etc, gold has had this really strong run over the past two years, and I saw in a recent investment commentary that you’d said that gold at the moment is still unloved among generalists. Could you explain what you mean by that?

Olivia Markham: I think there’s two ways we can think about this. So first, if you look at gold, we have seen more recently a pick-up in gold exchange-traded funds (ETFs). So, ETFs physically backed by gold purchases, but it still is below the peaks that we saw a few years ago, and it’s been quite recent that we’ve seen buying come through there.

If you look at gold equities, we actually still have outflows from the main big gold equity funds year to date.

So, I think that is certainly an area that people are noted underweight relative to historical allocations.

For us, there’s no real point here where we are concerned about positioning in either gold or the gold equities.

I still think this is a relatively niche area of the market. It’s only really those specialist investors who are looking at this area, and relative to people who are running much bigger global funds or macro funds, this is still a relatively small allocation in their portfolios.

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Kyle Caldwell: We’ve seen quite a noticeable increase over the past couple of months among interactive investor customers buying exchange-traded commodities (ETCs), in particular for gold and for silver.

In terms of when gold becomes overvalued and potentially is a bubble, is this when there’s a lot of demand from retail investors for gold?

Olivia Markham: When we think about whether a commodity looks extended, naturally we’ll think about [the] flows into some of those gold ETF products, what has been positioning in the futures markets, where are the valuations, for example, on some of the equities.

And for us, none of those things are flashing particularly red. So, I don’t like to use the word bubble too often, but we have had a pretty significant move up in gold, but the moves we’ve seen, or the positioning we’ve seen, is not causing us any concern yet.

Kyle Caldwell: Could you talk us through how you invest in gold within BlackRock World Mining Trust? How much exposure do you have? And could you talk us through how you invest in gold, which is through gold mining companies?

Olivia Markham: So, you’re absolutely right. We invest in the gold companies, the gold equities themselves. We believe that that is the best way to get exposure to gold because, if you look over time, gold equities typically perform through the equity risk premium, through the optionality they have to gold prices, through their ability to grow reserves and resources.

If you look at BlackRock World Mining Trust, we have our highest allocation to gold equities and precious metals - I want to say ever had, but it’s right up there, certainly over the last 20 years - at around about 40% of the fund today. And it’s moved a lot. If I widen the clock back to 2022, 2023, we had less than 15% allocation to gold. So, it’s been a very deliberate move on our part.

I think something that’s really important when you think about how you get exposure to gold is that you’re buying a gold equity or a gold company because you want to get leverage to the move in the gold price. Over the last couple of years, actually, the gold equity has been quite disappointing.

They just haven’t given you an outsized return to the gold price, and that’s because costs ate away at their margins and they really weren’t able to convert higher gold prices into higher earnings and free cash flow and dividends.

It's been very different over the last 12 to 18 months. We’ve been in this sort of Goldilocks environment of relatively modest cost inflation versus where we’d been over the peak of Covid.

The companies are being disciplined, and the gold companies have done a great job of capturing high gold prices, turning it into higher cash flow, and stepping up dividends. And that’s why these gold companies have given you that two to one ratio in terms of their performance relative to the move in the underlying gold price.

Kyle Caldwell: I touched on earlier that some of our customers have been buying silver ETCs. I know it’s a very small part of BlackRock World Mining. Could you explain why?

Olivia Markham: Yeah. So, if you look at our gold companies, quite a lot of our gold companies have silver exposure as well. So, in terms of pure-play silver, it’s smaller, but it’s actually really wrapped up into the rest of our gold companies.

Silver’s been a remarkable market. It’s often thought of as being a beta to the gold price, but it also has this really interesting industrial use, very closely linked to solar.

If you have a look at the build out in solar, particularly in China, the industrial pull on the metal has been very strong as well. So, we do have some silver exposure in there.

More recently, we’ve bought an early stage exploration pure-play silver company in the US, which looks really interesting. We’ve also had a silver company acquired from us as well, so there’s been a bit of movement.

For us, there are some interesting opportunities, they’re just a bit more on the smaller-cap spectrum.

Kyle Caldwell: While both gold and silver have been taking up a lot of the limelight, there have been other areas in commodities that performed very well in 2025, in particular, copper. Could you talk us through your exposure to copper?

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Olivia Markham: I think it’s also worth mentioning because gold has obviously performed incredibly well, but, actually, the rest of the commodity complex has performed very well as well.

So, you made a reference there to, say, copper. Copper’s up 25% year to date. The platinum group metals are up over 70% year to date. There’s some really interesting areas in our market right now, which I don’t think is being properly understood given this overwhelming market focus on artificial intelligence (AI).

But if we go to copper, and copper is an area in the portfolio where we have a lot of active risk. We have a big copper bet in the fund today, and that’s predicated on two points. So, from a demand perspective, copper is the metal which is the backbone of electrification. It is key for renewable infrastructure, building up the grids, distribution of of electricity.

So, that’s really interesting and you put alongside that the power requirements that we are going to need for AI, the infrastructure spend that’s going on globally, re-industrialisation of major economies like the US, it all becomes very copper intensive.

I think the demand picture for copper looks really interesting over the next decade or so.

Right now on the supply side, there’s never been a point in time that I’ve seen more disruption in the copper industry from a supply side. We have three of the world’s largest copper mines currently suspended and that puts incredible stress on a system that is already very tight.

So, we think that the copper market looks interesting not just now, but as we look longer term because we are in an environment where we’re going to have to bring on more copper supply if we want electrification, if we want the low-carbon transition. In order to do that, we’re going to have to incentivise high-cost assets into the market, and that means a higher copper price going forward.

Kyle Caldwell: Could you talk through how often you make changes to the portfolio, and what your most recent changes have been, perhaps over the past couple of months?

Olivia Markham: In terms of our investment horizon, I think the best opportunities to generate alpha and outperformance are when you look beyond three years.

So, we do invest not necessarily on a quarterly earnings change, but where we think a company could be in the future.

In saying that, we probably turn the portfolio over 30% to 40% or so during the year, so it’s not a huge number, but we’re certainly pretty active and particularly when you have some big moves, you need to be quite careful around how you manage positions, etc.

In terms of recent changes that we’ve made, I think it’s been further back, but we made a very deliberate decision at sort of this time last year to increase our gold exposure.

We saw gold as a really good way to play the uncertainty that was coming in terms of tariff announcements out of the US, and it’s been the correct decision.

More recently, there’s some really interesting dynamics that are happening in terms of, for example, the European steel industry with protectionist movements going on. That big shock that I talked about to copper, that’s been very positive for a lot of the other copper companies out there.

There’s a big focus at the moment around securing critical minerals outside China. We’ve been playing that theme as well. So, there’s lots of micro themes that are always running underneath in the portfolio that we’re trying to capture too.

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Kyle Caldwell: You run a diversified portfolio, investing in various different commodities. What are your thoughts on investors who decide to go down one route and gain exposure to a particular spot price through an exchange-traded commodity?

Olivia Markham: I guess when you think about wanting to have exposure to commodities or natural resources, you can do that through commodities themselves, or you can do it through the commodity equities.

I touched on this earlier, but if you look over time, it’s been the correct decision to invest in the commodity equities because they’ve given you that equity risk premium, they give you that optionality, that leverage to the move in the commodity price.

The time that it doesn’t work is an environment where you have cost inflation, which eats away at the producer margins. You see a lot of capital cost inflation, that’s also a difficult environment.

Or you see bad behaviour by the companies and value-destructive behaviour, and that has definitely been the case in our sector. We’ve got a poor track record of large-scale M&A in the last cycle, so that can have that value-destructive behaviour.

For the right here and now, I think that we are in this environment where commodity markets are becoming increasingly tight, that puts upward pressure. The companies are being well behaved. The companies themselves are trading at a discount to their historical valuations.

So, I’m very much in support of investing in the commodity equities versus the commodities themselves. And just to test me on that, we can invest in the commodities, and we choose not to. We are choosing to invest in the equities directly.

Kyle Caldwell: How often do you meet management teams? And do you meet management teams in person, and do you have on-site visits?

Olivia Markham: I meet so many management teams. It’s the main thing we do in our job. I love doing it. We have hundreds of meetings per year, that can be in the office, that can be conferences. We’ve also got this great opportunity to get our hard hats on and go out and see the assets.

So, it’s a big part of what we do, and I think it gives us our edge, particularly in a fund like the BlackRock World Mining Trust, which is a closed-end vehicle where we can buy into these earlier-stage companies, work with the companies, nurture them, see them grow, and watch that value grow alongside that with the share price.

So, it’s a big part of the job. And I think it is really important that we have a team that is well resourced with technical expertise, so that when we do go out and see the assets, we go in there with an educated view, and it helps us to not only understand the opportunities, but also the risks that come. That’s a big part of our job too, trying to avoid some of those pitfalls that can come in investing in this sector.

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Kyle Caldwell: I finally wanted to ask about the outlook for dividends. BlackRock World Mining aims to deliver both capital growth, but it can also pay an income as well. Although I know it’s not a progressive dividend policy, and last year, there was a reduction in the income that was paid out to shareholders. What’s the outlook now for BlackRock World Mining’s dividend?

Olivia Markham: I think you’ve outlined our dividend policy there somewhat. We effectively pay out all of the income that we generate from the underlying holdings of the portfolio, and also some of the other things that we do around option writing, we can invest in mining debt securities, etc.

So, when you think about the outlook, it fundamentally depends on the outlook for dividends from our sector. We went through this period around Covid, and just after, of exceptionally high commodity prices, particularly in the bulk commodities like iron ore, and that resulted in very, very high dividend payments from the sector.

Commodity prices have moved off those highs and naturally our dividend has come down with that. As I look forward, what we’re seeing is that gold companies are increasing their dividends, starting from a small base, but they’re increasing their dividends.

We have companies that have got strong balance sheets, so they have got scope to pay a fully covered dividend and they do pay fully covered dividends. Capital spending has increased a bit, but still quite modest.

So, we’re still in a very healthy environment for dividends as I look forward. The absolute direction, honestly, will be dictated a lot by what the commodity prices do.

But, for us, in the World Mining Trust, and I think this is really important versus investors out there who might just want to invest in a single-name mining company themselves, is our aim, really, is to try and generate a dividend which is more stable, more defensive, more diversified than what’s out there from just a single company or just a single sector themselves because we can use all these other tools.

We’ve got the option writing, we’ve got the ability to invest in privates, we’ve got some royalty investments of our own, we’ve got the mining debt securities, and the equities on top, and the dividends from the equities on top.

So, yeah, our dividend is much more diversified and that’s why you saw when there was a big dividend cut to the bottom of the cycle in 2016, our dividend - we obviously had to cut - but it held up a lot better than the single-name companies did.

So, as we look forward, that’s our aim. We want to have a very competitive dividend that’s well underpinned and diversified.

Kyle Caldwell: Olivia, thank you for your time. That’s it for our latest episode of On the Money. If you enjoyed it, please do follow the show in your preferred podcast app, and please do leave us a rating or a review. Those ratings and reviews really help to improve the visibility of the podcast and get it into more ears.

We love to hear from listeners, and you can get in touch by emailing OTM@ii.co.uk.

In the meantime, you can find more insights and practical pointers on the interactive investor website, which is ii.co.uk. I’ll see you next week.