With recent strength in the prices of gold, silver and other precious metals, Adnan El-Araby, co-portfolio manager of Barings Emerging EMEA Opportunities tells us why he believes that investors should be taking profits in it, by seizing the opportunity for making tactical adjustments.
The precious metals sector has delivered exceptional returns through 2025, with gold miners in particular benefiting from a perfect storm of central bank buying, geopolitical uncertainty, and U.S. dollar weakness.
Yet some of the most sophisticated investors are now taking profits and reducing exposure—not because the structural story has changed, but because the short term outlook has become ever more clouded. Speculation has exacerbated price movement and crowded investor position within precious metals prompting some investors to exercise caution.
The Case for Trimming Exposure
For investment trusts with South African exposure, the precious metals rally has been transformative. Thanks to South Africa’s unparalleled gold reserves concentrated in the Witwatersrand Basin, positions in companies such as Gold Fields and AngloGold Ashanti delivered returns exceeding 170% in sterling terms over the past year. The South Deep mine alone holds the largest remaining gold reserves on earth, which neatly positions South African producers at the heart of the gold supply story.
However, managing a high conviction portfolio requires more than identifying structural trends. It demands active risk management. When a sector runs “too hard, too fast,” as precious metals did through 2025, the challenge shifts from generating alpha to preserving capital. This is particularly acute for investors seeking to manage volatility whilst maintaining exposure to long-term themes.
The rotation began in December with platinum group metals (PGMs), followed by broader reductions across gold, silver, and copper in January. Whilst this initially felt premature — particularly during continued strength in the precious metal basket in early January. By systematically reducing positions as valuations extended, investors would have added alpha and capital returns on the way up and, crucially, attempting to limit negative returns during the current volatility.
Structural Drivers Remain Intact
It’s essential to distinguish between tactical profit-taking and a fundamental shift in outlook. The structural case for precious metals remains compelling. Central banks globally continue to build gold reserves, with purchases running well above historical averages.
Geopolitical fragmentation shows no signs of abating, whilst monetary policy uncertainty persists across major economies.
South Africa’s materials sector remains strategically important. The country’s geological endowment in gold and PGMs is irreplaceable, and operational improvements at major producers have enhanced profitability even before considering price appreciation.
For investors seeking exposure to precious metals through equities, South African miners offer leveraged returns to metal prices with improving operational fundamentals.
A Disciplined Approach to Re-entry
The current positioning reflects prudent portfolio management rather than market timing. By raising cash through profitable exits, investors can preserve capital and create optionality. Should precious metals consolidate at current levels or correct further, dry powder becomes available for strategic re-entry at more attractive valuations.
If and when re-investment occurs, gold appears the most likely target. Unlike industrial metals such as copper, which face cyclical demand headwinds, or silver and PGMs with greater price volatility, gold’s role as a monetary asset and store of value provides downside support. The central bank bid—the single most important structural driver—remains firmly in place.
However, this doesn’t preclude opportunities elsewhere. Copper’s essential role in electrification and energy transition infrastructure, silver’s industrial applications in solar technology, and PGMs’ importance in automotive catalysts all present compelling long-term cases. The key is entry point because the theme is understood by most market participants.
Conclusion
Strong conviction in a structural theme doesn’t preclude tactical adjustments. Managing volatility protects client outcomes and creates opportunities to compound returns through disciplined rebalancing.
Regional specialisation matters. Investors with deep expertise in South African mining have captured extraordinary returns from this cycle, demonstrating the value of specialist managers in niche markets. These vehicles provide investors access to opportunities and insights difficult to replicate through broad-based funds.
Preserving gains matters as much as generating them. In a sector as volatile as precious metals, the ability to step aside during periods of excess is what separates good long-term performance from mediocre results punctuated by sharp drawdowns.
The precious metals story isn’t finished—but neither is it a one-way bet. Investors demonstrating the discipline to take profits whilst maintaining strategic flexibility deserve close attention from advisers seeking sophisticated exposure to this compelling but volatile sector.
