Posted on 12/14/2011 8:25:11 AM PST by SeekAndFind
Commodity expert Dennis Gartman certainly struck a nerve in the financial community as word hit the street of his call on gold in the latest Gartman Letter (subscription required). Here is the gist, as reported by Bloomberg:
"Since the early autumn here in the Northern Hemisphere gold has failed to make a new high. Each high has been progressively lower than the previous high, and now we've confirmation that the new interim low is lower than the previous low. We have the beginnings of a real bear market, and the death of a bull."
For a bit of historical context, here is a 20-year overlay of Gold and the Dollar.
Here is an equally interesting overlay of Gold and the S&P 500.
Now let's take a long-term look at the Dollar and the S&P 500.
And finally, a three-way overlay.
(Excerpt) Read more at businessinsider.com ...
Has the government stopped printing fiat currency?
yup... gold’s gonna crater... just as they start rolling out QE3...
Oh, goody. Charts and charts and charts from the b.i.-blog to answer a fairly elementary if vague question.
We’re all smarter now. Please go click and give them money.
(BTW, what bull market?)
I remember junior high term papers with a minimum word count. I remember better written ones than this, too.
Lows are lower than highs, which are higher than lows. Wow, dude. It's, like, profound.
How about year end profit taking?
That's the only question you need to ask. There's a lull right now as Europe's banks try to recapitalize -- they're sucking up all the cash they can lay their hands on -- but nothing has changed that would cause people to have faith in paper currency.
When gold crashed in the eighties it was because Volcker and Reagan got serious about cutting the money supply to stop price inflation. All of a sudden, people saw a future in cash. I don't see anything like that happening now.
As long as the Fed exists there will be increase in fiat currency in the long run. The congress is addicted to it and the government couldn't exist in its current form without it. Gold will never stop going up long term.
I think you’re right, but it’s a race to the bottom. Dollars are worth less and less.
In August 2011, Gartman said that gold was the biggest bubble of our lifetime.
Inconsistently, only last week, Gartman said on CNBC that he is “long gold” and has been for “six or seven months”.
Gartman’s short term calls on gold and silver have been wrong more often than not in recent years. He tends to turn bearish after gold has already experienced a correction and is close to bottoming.
Those wishing to diversify and add gold to their portfolio will use his call as a contrarian signal that we may be getting close to a low in this most recent sell off."
More Gartman flip-flops here. (10/25/2011: "Only last Tuesday, Gartman wrote that the gold market is suffering "very real damage." His comments were picked up very widely making headlines in the financial media internationally. Gartman warned that he feared that the rally from September's lows is "now under assault." Today, Gartman said in his newsletter that he was certain gold prices would break upwards sooner rather than later."
2) The third Friday of the month is the traditional gold smashdown and has been for quite a number of years. I noted this on Monday: "Doubters can check this recent annotated calender for 2011 with particular attention to the last four expiration dates in a row:"
http://4.bp.blogspot.com/-k70PX_K8q8I/TsrB4jgcGII/AAAAAAAATEs/FAXSo9mHlRc/s1600/golddaily26.PNG
3) FOMC "hawks" will be replaced by "doves" (more inclined to print money") by the next FOMC meeting:
"the Fed's balance of power is about to shift substantially. With under 30 days left in 2011, the current roster of 4 rotating voting Fed governors is about to be swept out, only to be replaced with 4 new ones. ...the rotation will probably be the most dramatic in Fed history as 3 die hard Hawks (and 1 dove) are eliminated only to be replaced with a panel which is almost exclusively Dovish."
http://www.zerohedge.com/news/when-doves-laugh-4-weeks-until-quiet-coup-fed-gives-qe3-green-light
4) end-of-year profit taking as mentioned earlier
5) money-printing everywhere as mentioned earlier
Don’t be surprised of gold drops to $1300 or so for awhile.
Might this be the scenario taking place?
Run on euro banks begins. Euro banks run out of cash. Other banks around world won't lend euro banks cash 'caused they all know they're insolvent.
Euro bankers simultaneously take elevators down to basement vault of their respective banks, pick up gold bars and mumble to themselves, "We need cash quick, and this will get it for us. I better sell a few extra bars too, because other euro bankers will soon be doing the same thing and with all that gold on the market, the price will drop even lower.
Mmmmmm...let's see, I wonder how many bars the elevator can hold in one trip."
I’ve posted this before, but I think it might need a revisit.
Commodities, such as gold are priced in dollars.
When currencies are in decline (read the Euro) the ratio of dollars to those currencies changes. At this point, the dollar is gaining strength against most other currencies.
As the dollar index goes up, the price of commodities (such as gold) will go down—more value in the dollar buys more.
This is OK as the major currencies are in a free fall. At this particular moment, the dollar is the least crappy of them all.
So, the dollar goes up, and the price of gold goes down. And there are a lot of dopes out there who are leveraged to the hilt—you’d think they’d learn. So as the price of gold declines, you are seeing folks de-leverage out of the margin accounts. After today, the margin calls will come out big time...and the metal will fall again.
BUT, by this time next year, Europe will be in recession, the US will be moving into one, and if the middle east is still around, the chances of oil being high in a post war Iran and Saudi Persian gulf will be well into the $120 range—at least.
Gold will look cheap at $2000 an ounce one year from today.
But I forgot to add, that the world will be ending almost a year from now so I hope I’ve cashed out the gold and I am living on the beach in some remote place where my wife and I can sip drinks and take in the final roll call for humanity.
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