Skip to the content

Tom Becket: Endgame for dollar has already begun

17 January 2018

Psigma’s chief investment officer expects China to replace the US as the world leader with regard to financial and political power over the next 20 years.

By Anthony Luzio,

Editor, Trustnet Magazine

Tom Becket is backing gold to outperform in the medium to long term as the “endgame” approaches for the US dollar.

The dollar began a cyclical upturn in June 2013 when then chairman of the Federal Reserve Ben Bernanke announced plans to taper the US’s quantitative easing programme. This caused the dollar to rise by double digits against other major currencies such as the pound, yen, yuan, euro and Swiss franc up to the start of 2017.

Performance of currencies against US dollar since "taper tantrum"

Source: FE Analytics

However, it has fallen against all of these measures over the past year, which Becket – chief investment officer at Psigma – thinks is the start of a longer term trend as the balance of global financial power shifts away from the US.

“I am a bit of a conspiracy theorist by heart, I go home and put a tinfoil hat on and things like that,” he quipped.

“But what’s really been interesting over the past couple of years is the rapid accumulation of gold by central banks around the world, in particular the US’s former and potentially future enemies.

“Russia and China are now de-dollarising their economies and building up their levels of gold, that is really quite an interesting dynamic.”

Becket predicted that China will replace the US as the world leader with regard to financial and political power over the next 20 years, which will also be detrimental to the dollar. He added that, despite the pre-election pledge to “make America great again”, the policies of US president Donald Trump are likely to hasten the currency’s downfall.

“Some of the things we are seeing in the US are quite frankly ludicrous,” he continued, “particularly with regard to what people are describing as tax reform – there is no tax reform, these are tax cuts.

“They are giving very cash-flush companies and wealthy individuals big tax cuts in a positive economic cycle.

“Frankly it makes no sense whatsoever, bringing in less tax revenue at a time when US entitlements are going through the roof – that to me equates to being quite a weak dollar situation.

“If China follows through on some of the recent comments about buying US treasuries, frankly what price the dollar in that environment given that it is basically funding the US deficit?

“I think the dollar, aside from some cyclical upturns, one of which we obviously saw a few years ago, has started its endgame.”


Becket said gold should perform well in this environment. He also thinks it will benefit from increased geopolitical uncertainty, adding the recent surge in populism may be just the beginning of this trend, rather than the end.

However, he said that investors should think carefully about their entry point into gold and the best way to play it – and for him, this means miners.

“The interesting dynamic from an investment perspective is that gold companies remain significantly undervalued in comparison with gold bullion prices,” he added.

“It’s interesting because gold companies were unbelievably bad a decade ago, they were among the worst companies in the world. For those of us who have been around for long enough, I remember [former M&G manager] Graham French – who was an outstanding mining company investor – who avoided gold companies because they really were that bad.

“But the old mining managers have been washed out now, new ones have come in and now they are operating like proper companies, making money and giving profits back to shareholders, so it’s an interesting dynamic.”

There are nine funds in the IA universe that focus on gold miners, the most well-known of which is the £1.1bn BlackRock Gold & General vehicle.

The team at Square Mile said this fund benefits from one of the most highly regarded natural resources teams in the industry – including manager Evy Hambro.

“In essence, the team is looking to create value by having a deep understanding of companies and capitalising on the market's inefficiencies in applying an appropriate valuation to them,” the analysts said.

“Given the emphasis on the quality of the asset base, management and capital allocation, there will tend to be a more defensive tilt to the portfolio, meaning it could lag in low-quality rallies but provide more support in weaker environments.”

The team added that the fund’s performance is likely to be very different from that of its FTSE Gold Mining benchmark as the index is dominated by a few very large businesses.

Data from FE Analytics shows BlackRock Gold & General has lost 1.64 per cent since Hambro became manager in April 2009, but this compares favourably with losses of 28.87 per cent from the FTSE Gold Mines index. The fund has an ongoing charges figure (OCF) of 1.17 per cent.

Performance of fund vs sector under manager tenure

Source: FE Analytics


FE Invest’s preferred option in this area is Investec Global Gold, noting that while Investec takes an active approach, the fund is one of the cheapest of its peers, with an OCF of 0.91 per cent.

“The fund has performed in line with its benchmark over the long term but was able to minimise losses that stemmed from a disconnect between the gold bullion price and equities during a down market from 2012 to 2014,” the team said. “Since the team joined in 2015, it has added value with its stock picking skills.”

Performance of fund vs sector under manager tenure

Source: FE Analytics

The £98.2m Investec Global Gold fund has made 50.4 per cent since FE Alpha Manager George Cheveley took charge in April 2015, compared with gains of 103.89 per cent from its EMIC Global Mining Global Gold benchmark.

Editor's Picks

Loading...

Videos from BNY Mellon Investment Management

Loading...

Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.