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Currency concerns see Armstrong add ETFs to pick up gold

Armstrong Investment Management has bought two exchange traded funds on the back of recent falls in gold prices and Asian stocks.

The multi-asset multi-manager boutique, which has just been selected to manage the £184m Dublin-based Dynamic Assets funds, has added the ETF Securities physical gold and IShares DJ Asia Pacific Select Dividend Growth ETFs the IM Armstrong diversified real return fund.

The firm is concerned about the prospects of the euro, the dollar and the pound due to the potential debt crisis in the eurozone, and the US and UK governments spending more than the revenue they generate.

A long period of unprecedented economic growth or inflation is the only way out of debt for these regions, according to Armstrong IM. It says the viability of the euro as a reserve currency has come into question and the dollar is still being seen as the safe-haven currency.

A reserve currency is a currency that governments favour for their foreign exchange reserves and is used to pay off international debts or influence exchange rate. The dollar is the most dominant reserve currency and usually has an inverse correlation with gold but they have recently been rising at the same rate.

Managing partner Patrick Armstrong says: “The dollar and gold have both rallied significantly versus European currencies this year, but we expect the problems facing the US will inevitably be recognised by markets and lead to further price rises for gold. We want gold exposure rather than gold stocks at this point. A gold ETF is the best way to get physical gold in our opinion.”

The firm also holds the iShares ETF to gain exposure to the highest quality and high-dividend stocks in Asia, which have lagged the more cyclical stocks since the lows of March 2008.

Armstrong says “We believe these stocks, with a skew to telecommunication services, consumer staples and high-yielding construction sectors represent good value as well as offering potential for much better growth than Western markets.”


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