Latest / Strictly Business / The Asset Class with George Chevely

Transcript

The Asset Class with George Chevely · Strictly Business

• 0:00
  You're listening to Strictly Business Podcast with Lindsay Williams.
• 0:05
  At the beginning of 2024, the gold price was hovering around US$2,000 per ounce.
• 0:10
  At the end of that year, it had risen to around US$2,600.
• 0:14
  And then in 2025, just last year,
• 0:17
  it started to accelerate a bit and the graph started to steepen.
• 0:22
  And then recently, in the month of January 2026, people got a little bit silly, I
• 0:28
  think.
• 0:28
  The gold price went as high intraday to $5,625 an ounce, to be precise.
• 0:34
  And then within 48 hours, it had fallen precipitously to below $4,500.
• 0:41
  Currently, as we pre-record this podcast, it's around about $5,050.
• 0:46
  So it's all over the place.
• 0:48
  Here to make sense of it is George Cheveley, portfolio manager at 91 in
• 0:53
  London.
• 0:53
  It got a bit silly, didn't it, George?
• 0:55
  Yeah, there was a lot of buying in the beginning of...
• 0:58
  this year, as people and I think a bit of FOMO came into play,
• 1:02
  we'd seen the price start to move and everybody came in and decided they needed
• 1:09
  to own gold this year.
• 1:11
  And certainly things moved very, very rapidly.
• 1:12
  And it was exacerbated by the fact that everybody felt that, you know,
• 1:17
  Trump's pick for the Fed chair was various names were flying around.
• 1:22
  It was hugely uncertain and everybody thought, you know, this was very bad news
• 1:27
  for the dollar.
• 1:29
  because the Fed was going to lose its independence.
• 1:29
  So that sort of played into the fears around gold.
• 1:33
  And then you throw in the fact that Iran, you know, the situation was getting more
• 1:38
  tense.
• 1:38
  We obviously had Venezuela at the beginning of the year, so geopolitics was
• 1:42
  super uncertain.
• 1:44
  So it was a cocktail of events that really drove that price very high.
• 1:48
  We've still got the Iran situation, and there was a drone flying over one of the
• 1:54
  aircraft carriers, I think it was,
• 1:56
  and it was shot down, and that alerted.
• 1:58
  people and gold started to twitch a little bit.
• 1:59
  So that's still there.
• 2:01
  The debasement of the dollar, though, which was another reason for the gold
• 2:07
  rally, in my opinion,
• 2:09
  hasn't really materialized.
• 2:09
  And the Fed chair nominee doesn't seem to be as radical as some of the other
• 2:15
  potential choices.
• 2:17
  No.
• 2:17
  And last Friday was a very good reminder.
• 2:20
  You know, if you talk to anybody who's looked at gold for any time, they would
• 2:25
  say Fed.
• 2:25
  policy has always been a key driver of gold.
• 2:28
  And for Fed policy, you know, Fed generally.
• 2:32
  And clearly, the worries that the Fed was losing its power and losing its control
• 2:38
  and Trump was
• 2:40
  taking control, was worrying people about interest rates in the States, they thought
• 2:45
  they'd fall too fast.
• 2:47
  And then bond rates were all over the place.
• 2:48
  And people were worried about the dollar.
• 2:50
  And actually, when the nominee was announced, which was Walsh,
• 2:55
  who is seen as certainly more sensible than some of the other names being thrown
• 3:00
  around.
• 3:02
  You know, we were reminded that actually the Fed still matters when it comes to
• 3:08
  gold and the fact the Fed nominee looked more
• 3:10
  sensible and Fed policy might not be so radical going forward.
• 3:14
  We saw the froth come out of the gold market very quickly.
• 3:17
  Froth it was as well.
• 3:19
  So where does that, and actually I'll come to where does that leave us towards the
• 3:22
  end.
• 3:23
  The other factor that really contributed to the extraordinary volatility in the
• 3:29
  gold market was the extraordinary volatility in the silver
• 3:31
  market.
• 3:33
  All sorts of stories coming out now that the silver trade was subject to
• 3:36
  deleveraging
• 3:38
  and there was a lot of Chinese influence.
• 3:39
  And in fact, I saw something flash across my screen just about half an hour before
• 3:44
  we started, George,
• 3:46
  about a Chinese trading company that purportedly made...
• 3:48
  500 billion US dollars out of the silver market.
• 3:51
  So silver, a factor, speculatively?
• 3:55
  It certainly was very noticeable in the sell-off.
• 3:57
  And it's obviously, I've always seen silver as leveraged gold, and it's been
• 4:04
  acting like that, particularly in the last few months.
• 4:06
  It is obviously more attractive to a lot of retail people because you can buy more
• 4:11
  with less money, essentially.
• 4:13
  So you can actually buy a significant amount of silver.
• 4:15
  And therefore, it's always been a favorite of retail investors.
• 4:19
  But as a result, there's always been more leveraged.
• 4:21
  And clearly, you know, with gold moving as it did, silver moved.
• 4:25
  I have to say, if you look at last week, everything was moving.
• 4:28
  We saw all metals moving, platinum, copper, aluminium.
• 4:33
  We even had oil moving up quite significantly.
• 4:35
  Some people said that was Iran, but it was almost a general anti-dollar trade.
• 4:41
  I think we've also got to remember this is a bit of a rush for hard assets, which has
• 4:47
  occurred at the same time.
• 4:49
  So people are getting more worried about the AI tech trade,
• 4:52
  and you're seeing a rotation more generally into hard assets and resource
• 4:58
  equities in many markets.
• 5:00
  Given what you just said over the last few minutes, there's still a case for gold,
• 5:03
  isn't there?
• 5:03
  Where do you see it going from here?
• 5:04
  And how would you play it?
• 5:05
  In other words, what vehicles would you use to take advantage of what you see as
• 5:12
  the future of
• 5:14
  gold?
• 5:16
  We're clearly in a very volatile period.
• 5:18
  When you've got a trading range of over $1,000 in the last week, you've got to be
• 5:20
  very careful.
• 5:22
  And clearly, we need to see things settle down.
• 5:25
  I have to say, if I look at all the drivers for gold, you know, when we talk
• 5:31
  fundamentals, we're really talking drivers.
• 5:33
  If you say, you know, interest rates like to fall or rise in the States, they're
• 5:37
  likely to fall.
• 5:39
  That's positive gold.
• 5:41
  Does that mean the US dollar weakens or strengthen?
• 5:43
  It probably on margin means it weakens.
• 5:45
  That's positive for gold.
• 5:47
  Are geopolitics getting any less uncertain or stable?
• 5:48
  They look like they're going the opposite way.
• 5:49
  We still have Iran, we still got, you know, US and China essentially competing
• 5:56
  more ferociously with each other.
• 5:58
  That just creates a very unstable backdrop.
• 6:00
  So all those drive, as you would say, and economic uncertainty remains, you know,
• 6:06
  very high.
• 6:08
  A lot of question marks about the US market, US debt levels, fiscal policy,
• 6:12
  what's going to happen in the midterms.
• 6:14
  There's nothing, you know, pointing you to say, oh, I can see why things are going to
• 6:18
  settle down and we won't need, you know,
• 6:20
  people won't look for gold as a safe haven.
• 6:21
  So all those drivers are in place.
• 6:23
  Almost the most worrying thing about gold at the moment is one,
• 6:26
  it's moved a lot already and it's very hard to come up with a bare argument for
• 6:30
  gold.
• 6:31
  And that's always a worrying thing when you're looking at any market.
• 6:36
  All that said, that means, I mean, my view certainly is gold is likely to hold
• 6:43
  current ranges, and that's a wide range.
• 6:45
  But let's just say I think gold can hold above $4,500.
• 6:48
  And the risk, if I'm wrong, is that it goes higher rather than lower.
• 6:53
  Where do I look to invest?
• 6:54
  And this is, you know, might sound like a repeat.
• 6:57
  I'm a gold equity fund manager.
• 7:00
  And so obviously I'm going to say equities, but actually.
• 7:03
  You know, today, I believe it more than ever, because the equities, whilst they're
• 7:10
  up three times over the last year,
• 7:12
  or many of them are, that actually their margins are up four to five times.
• 7:15
  So we're still looking at equities trading on single digit PEs with good growth
• 7:21
  numbers.
• 7:23
  And what you have to believe, and it is maybe a big ask, but you have to believe
• 7:28
  gold's going to stay about four and a half, if you believe that.
• 7:30
  These companies actually, or many companies, not all, but many companies
• 7:35
  look very, very cheap today.
• 7:37
  Right.
• 7:39
  Let's move from gold to copper, the red metal.
• 7:41
  And that's been quite extraordinary as well.
• 7:43
  We spoke about it last time and I could almost see or rather hear a twinkle in
• 7:47
  your eye if that's possible when I mentioned copper.
• 7:49
  And it hasn't disappointed, has it?
• 7:49
  No, it's been one of those very pleasing trades.
• 7:52
  In last August, we got bullish copper.
• 7:55
  We felt there was a squeeze coming.
• 7:57
  The tariff thing obviously was driving copper to be delivered to the US,
• 8:02
  which continued probably stronger than we believed.
• 8:04
  But it meant that essentially we've ended up with all the copper inventories in the
• 8:11
  States and very tight markets elsewhere in the world.
• 8:13
  And that's led to this squeeze for a moment where copper prices have been
• 8:16
  driven higher,
• 8:18
  as essentially they've had to push prices up to attract metal out of the States or
• 8:22
  at least stop it going in.
• 8:24
  I have to say, though, you know, copper is more based on fundamentals.
• 8:27
  You know, if I look at copper today, you know, demand is pretty lackluster.
• 8:32
  Now we're coming into Chinese New Year.
• 8:34
  It's always a difficult time of year to judge what real demand is.
• 8:38
  But certainly all the indicators at the moment is it's pretty soggy.
• 8:42
  People are not willing to pay these high prices.
• 8:45
  And whilst there is some units moving, there doesn't seem to be a big fundamental
• 8:51
  drive in the demand side now.
• 8:53
  Certainly, we probably should wait the end of March and post-Chinese New Year.
• 8:55
  It might be the Chinese have just stopped ahead of New Year and will be driven to
• 9:01
  buy, you know, come back into the market in March.
• 9:03
  But if that doesn't happen, copper feels definitely overextended.
• 9:06
  And actually, you know, I invest in copper equities.
• 9:11
  If I look at copper equities today, unlike gold equities, copper equities have
• 9:17
  actually kept up with copper prices, if not.
• 9:19
  ahead of them.
• 9:21
  So valuations of copper equities, the pure plate copper equities, actually look
• 9:23
  pretty stretched.
• 9:25
  We're talking PEs in the 20s, even 30s in some cases,
• 9:27
  which the assumption therefore is that copper prices are going to be here or
• 9:33
  higher long term,
• 9:35
  which I think is too bold an assumption.
• 9:36
  So does that mean you've adjusted your positioning at 91?
• 9:40
  Yeah, we've essentially taken some profit on the copper equities we've held.
• 9:44
  And we've certainly put a bit more back into gold over the last month.
• 9:48
  The other thing we've done, though, in the mining space is added more in the large
• 9:53
  diversifieds.
• 9:55
  And that's been particularly driven by the sort of speculation around the
• 9:59
  Rio-Glencore merger,
• 10:01
  which we're waiting to see hopefully any day, whether that happens or not.
• 10:03
  Our view is it happens.
• 10:04
  Our view is it's positive for Rio and Glencore.
• 10:08
  George, thanks so much for your time and your analysis.
• 10:10
  George Cheveley is a portfolio manager at 91 in London.
• 10:15
  The views and opinions expressed in these podcasts are those of Lindsay Williams and
• 10:22
  various contributors and do not reflect the policy,
• 10:24
  position or opinion of any other agency, organisation,
• 10:26
  employer or company associated with StrictlyBusinessPodcast.com.
• 10:31
  Assumptions made on the analyses are not reflective of the position of any other
• 10:38
  entity other than the speaker or the author
• 10:40
  and since we are critically thinking human beings these views are always subject to
• 10:44
  change, revision,
• 10:46
  and rethinking at any time.
• 10:46
  Please do not hold us to them in perpetuity.