Critical Materials in an Era of Energy Security and Defense

April 1, 2026 | (8 mins 25 secs)

Rising geopolitical risk, energy insecurity, and record defense spending are reshaping demand for critical materials and precious metals. In this episode of Metals in Motion, Steve Schoffstall breaks down what today’s market volatility means and why long-term fundamentals for uranium, copper, rare earths, gold and silver remain compelling.

Video Transcript

Thalia Hayden: You're watching Metals in Motion. I'm Thalia Hayden with ETFguide. We're glad to see you again. Does gold's recent weakness during a global crisis signal a breakdown in its safe haven status? Or is this a temporary divergence? Here to answer that and more is Steve Schoffstall, Director of ETF Product Management at Sprott Asset Management. Welcome, Steve. Thanks for joining us.

Steve Schoffstall: It's great to see you again. Thank you.

Thalia Hayden: The escalating conflict with Iran has triggered renewed volatility across global markets. How should investors be thinking about allocations to critical materials in this environment?

Steve Schoffstall: This is a question we're getting a lot. One thing we tell investors is, if you look at why you originally invested in the critical materials space, does that thesis still hold true? And a lot of times, when we're having these conversations, we tell investors it's best to focus on the long term. We're going to see periods of volatility, particularly in miners, where many of these materials are still in emerging sectors. We expect volatility. A lot of it comes down to staying resolute in your investment convictions. And look at these pullback opportunities as opportunities to potentially reinvest at lower prices.

Thalia Hayden: With oil prices rising sharply since the onset of the Iran war, what effects are you seeing on demand for critical materials like copper, uranium and others?

Steve Schoffstall: Critical materials are being influenced more by expectations than actual events. When you look at the fundamentals of many of these critical materials, we haven't really seen anything change from that standpoint. And I'd argue that, over the last 4 to 6 weeks, we've seen those cases get considerably stronger.

Uranium is a great example of this. What we're seeing in the oil market is that energy security is no longer an option for most countries. The President of the European Commission just said on March 10 that moving away from nuclear energy for Europe was a strategic error. When you start to see this type of rhetoric, we expect to see policy follow.

Some other markets, like copper, are increasingly used for non-core purposes. So, not real estate or those types of things, but about 68% of uses now would be considered core uses. That's expected to drop to about 55% over the next two decades. A lot of that extra growth is expected to come from defense spending, which is now over $2.6 trillion. It took about 5 years after we broke the $2 trillion mark to reach $2.6 trillion. Things like rare earths, which are very much used in missile technology, drones, which we're hearing a lot about, fighter jets, many defense systems and even lithium. We're hearing that some battery makers that were originally setting up operations for EVs are now looking to the defense industry. Lithium is very important in drone technology, missile guidance systems and related applications. Energy security will still be front and center in this. But we also see another aspect of defense spending that is likely to provide additional tailwinds for many of the critical materials moving forward.

Thalia Hayden: When we look at miners, how do you expect the recent decline in metal prices to affect them?

Steve Schoffstall: Some of that is shaking out here in the short-term volatility. Whenever you see higher oil prices and energy costs, that's going to hurt miners because it's more expensive to run their machines. But if you step back and look at the bigger picture, what we're seeing is still incredibly bullish for miners of critical materials. Price floors on critical materials stabilize prices and enable miners to make informed investment decisions. And we're seeing direct government investment not only in various projects but also in miners themselves. And just the incentives that we're seeing coming through, the government action, to build out domestic supply chains, all these are very supportive for the miners of critical materials in particular. We're coming through a period now where you've had 2 or 3 years of sustained higher prices for many of these metals. A lot of these miners are much more profitable than they were 2 or 3 years ago. We still think there's a great opportunity for returns in many of these miners.

Thalia Hayden: Shifting to gold now, Steve, the recent market selloff has caught many investors off guard. Does this challenge gold's role as a traditional safe haven, or is this more of a short-term dislocation?

Steve Schoffstall: We're seeing a short-term dislocation. The energy markets are experiencing extreme stress, leading to higher asset correlations. They're moving in the same direction, more of the same. You tend to see some pronounced moves in one direction or the other. This isn't new for gold. During the Global Financial Crisis in 2008 and the COVID-19 pandemic in 2020, we saw a similar pattern emerge: gold sold off. Usually, it's not because it's losing its safe-haven status. There is often a need for liquidity. And gold is one of those assets through which investors can access liquidity. That is creating selling pressure. But I think another aspect that's really changing the gold market is the demand from central banks, which has now taken center stage for the last 4 or 5 years. That's slowed here as countries navigate higher energy prices. And we expect that once we get through this period of market volatility, we may see central banks return to the table and continue their buying as they look to diversify away from U.S. dollar-denominated assets.

Thalia Hayden: Steve, one last thing before we wrap up. Silver has declined sharply after hitting all-time highs earlier this year. Are the drivers behind silver's weakness fundamentally different from those behind gold's? And what does that divergence signal about industrial demand versus monetary demand?

Steve Schoffstall: They are a bit different. I think probably the biggest difference would be that with silver, you don't typically see large amounts of sovereign buying like you do in the gold market. What you're seeing now is a lot of volatility coming into the silver market through derivatives, such as futures and options. When you step back and look at the fundamentals, you mentioned increased industrial demand as one of the key drivers of silver markets. And in our view, the fundamentals remain strong. Over the last six years, silver has been in deficit each year. And going back even further, to about the middle of the last decade, we've seen supplies decrease by about 4%. We're in a market where we're seeing decreasing supply, increasing demand and short-term volatility. We don't expect that to have a long-lasting impact on silver's long-term outlook.

Thalia Hayden: Steve, thank you so much for joining us. We appreciate your timely insights. Keep up the great work.

Steve Schoffstall: Thanks. It was great to be here.

Thalia Hayden: For U.S. investors, Sprott offers several ways to participate through ETFs linked to high-demand critical materials and minerals, such as uranium, rare earths and copper. Visit SprottETFs.com for the very latest. And that does it for today's episode of Metals in Motion. I'm Thalia Hayden with ETFguide. Thanks for watching, and we'll see you next time.