Gold guru and founder of The Gartman Letter sees commodity prices gyrating with no real direction in short term.
With financial markets experiencing their worst turmoil since 2008, Hard Assets Investor is conducting a virtual roundtable with commodity experts, asking them a series of questions facing investors during these tumultuous times. We hope this gives you some guidance when investors need it most. Today we speak with Dennis Gartman, founder of The Gartman Letter and respected commodity commentator. Previous Market Roundtable interviews are linked at the bottom of this interview.
Hard Assets Investor: How will the U.S. downgrade affect demand on commodities?
Dennis Gartman: Hardly at all. Six months from now, we will look back and try to find what the date was that the downgrade occurred in order to correlate it to demand for grain, rubber, copper, crude oil. You won't be able to find the date.
HAI: Will the current low inflation environment persist? And will commodities be a good hedge should it not?
Gartman: Commodities define inflation. If inflation rises, commodity prices will have been the reason for it. If inflation falters, declining commodity prices will have been the reason for it. So therefore, by definition, they will be both a hedge for inflation if inflation occurs, and deflation if deflation occurs.
HAI: Do you think the Fed will initiate QE3? And what impact will that have on commodities?
Gartman: I suspect that they won’t. If they did, it would probably spur commodity prices higher in U.S. dollar terms. And if they don’t, the impact will be nonexistent.
HAI: Where do you see gold heading? And is there a price that is too high, given the current environment?
Gartman: The price of gold has been moving from the lower left to the upper right for a decade on the charts. It’ll probably continue to move from the lower left to the upper right in broad terms. And you can write this down: The price will be too high when it gets too high.
HAI: Where do you see oil heading? And will the spread between Brent and WTI ever revert?
Gartman: The spread between Brent and WTI will revert sometime in my lifetime. But that’s all I’m willing to say. Probably between now and the next two years it will continue to widen out because of real fundamental differences between transportation into various types of crude. So if the question is, “Will it narrow any time in the future?” The answer is, of course it will. Is it going to narrow in the very near future? Probably not. Where are oil prices going generally? Probably higher, but not dramatically so.
HAI: What’s the best positioned commodity for the current environment, and why?
Gartman: The best positioned commodity? Boy, that’s a tough question. I guess that if you forced me to buy anything, I’d probably buy rice. But my enthusiasm for buying anything at this point is relatively minimal. And so, too, is my enthusiasm for being short of anything. I think there’s enough confusion out there regarding economic circumstances to keep the price of things gyrating, but not moving much in either direction after the course of a month or so.
Other Market Turmoil Roundtable Interviews