December 20, 2011
Dennis Gartman has been publishing his daily commentary, The Gartman Letter, since 1987. The Letter addresses political, economic, and technical trends from both long-term and short-term perspectives, and our subscribers include leading banks, brokerage firms, hedge funds, mutual funds, and energy and grain trading firms from around the world. Over the years, he has also conducted numerous presentations and courses on issues relating to the capital markets and derivatives for various brokerage firms, central banks, and U.S. government entities.
I spoke with Gartman on December 18.
You’ve been in the news lately because of a call you made last week on the price of gold. Can you review what that call was, and the reasons behind your forecast?
First of all I, have been I have been bullish on gold for a long period of time, and primarily bullish in non-dollar terms, in term of euros.
I have not been bullish on gold relentlessly. For years, I’ve been bullish, very bullish, or neutral, but there have been no times during that period when I have been overly and actively bearish.
Having said that, what did I say earlier this week? I said that it was time to go to the sidelines once again. I was afraid that perhaps a bear market in gold has started. I noticed that we had not made new highs in gold in dollar terms since August. I was most fascinated by the fact that we had stopped making new highs on gold in euro terms over the course of the past several months. And I was very concerned about the fact that the movement in Europe, given the prevailing political and the economic circumstances, was giving way to dangerous economics. Everybody everywhere is becoming more and more austere.
It is now politically correct only to substantively cut spending or to moderately raise taxes. The last time We saw this sort of political and economic singularity was in the mid-1930s when our Secretary of Treasury, Andrew Mellon, took what to me was a substantively weak recession and turned it into a massively weak depression, by trying to balance the budget – slashing spending, liquidating farms, and raising taxes. What is going on in Europe these days is reminiscent of what was going on in the United States in the 1930s.
The gold market was paying attention to the fact that there are deflationary concerns rather than inflationary concerns. Far too many people and too many institutions long on gold. Gold stopped making new highs, and it began to weaken relative to the equity markets.
That was enough to tell me it was time to go to the sidelines. I did. The newspapers and media said “Gartman turns bearish on gold.” No, Gartman simply turned neutral on gold, fearful that several hundred dollars to the downside was likely, and preferring the relative safety of the sidelines to the volatility of being involved in the market.
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