The London Stock Exchange is packed with top exchange-traded funds (ETFs) for investors to consider. Here are two I think deserve serious attention in today’s climate.
Golden gains
Gold’s prolonged bull run is showing no signs of slowing. The yellow metal has struck fresh all-time highs near $3,650 per ounce in recent hours. Analysts are tipping further gains as economic worries (like returning inflation and growth-hitting tariffs) spook investors.
Goldman Sachs — which recently said gold prices could touch $5,000 per ounce in the next year — has said in recent days that buying gold stocks could be an effective way to capitalise on bullion prices.
It’s a strategy that exposes investors to the unpredictabilities and dangers of metals mining. Disappointments at the exploration, mine development and production phases can be common. In these situations, their profits can underwhelm even if gold prices continue rising.
The iShares Gold Producers ETF (LSE:SPGP), which — at the latest count — had holdings in 68 different miners can reduce stock-specific risk but it can’t eliminate it.
Having a stake in metal producers over physical gold and gold-price-tracking funds has significant advantages. Profits at miners can grow at a faster rate than the gold price, as revenues rise in line with gold prices while costs stay largely fixed. This can lead to far greater capital gains.
Gold producers can also provide a dividend, while physical metal and price tracking funds don’t. The dividends the iShares Gold Producers ETF receives are automatically reinvested into the fund, providing an added boost to growth.
With a focus on large-cap miners including Agnico Eagle, Barrick Gold and Wheaton Precious Metals, this iShares instrument provides great stability while still harnessing gold’s long-term investment potential.
A new ETF
Defence is another sector that’s tipped for strong and sustained expansion. This makes funds such as the WisdomTree Europe Defence (LSE:WDEP) — which has risen 14% in value since its March launch — also worth consideration in my view.
As its name suggests, it focuses on European companies. This may have a major advantage as continental defence spending is tipped to rise especially strongly over the long term. This geographical focus also reduces the threat of lower US military spending, which is more of a natural threat to North American contractors. That risk is still an issue for it though.
In 2024, European arms spending rose 17% to $693m, according to the Stockholm International Peace Research Institute. Canadian demand meanwhile increased 7% year on year, to $29m. It’s a trend industry boffins expect to continue, with GlobalData predicting combined expenditure from Europe and Canada to hit $1.3bn by 2035.
The WisdomTree Europe Defence fund provided significant exposure to large and diversified arms suppliers like BAE Systems and Rheinmetall. Indeed, more than 91% of the fund is tied up in businesses with market caps of £10bn and above. It therefore benefits from scale and stability, and may be able to better weather problems like competition and supply chain challenges.
In total, it has holdings in 24 different defence shares, which I’m optimistic will deliver excellent long-term returns.
