Gartman: Gold A Buy, Bitcoin A Bust

September 25, 2018

Dennis GoldmanDennis Gartman is the man behind The Gartman Letter, a daily newsletter discussing global capital markets. For more than 30 years, The Gartman Letter has tackled the political, economic and social trends shaping the world's markets. recently spoke with Gartman to discuss the latest developments in the financial markets. The S&P 500 just hit a record high. Would you be a buyer of U.S. stocks right here?

Dennis Gartman: No, but neither would I be a seller of them. The market is extremely overbought and overextended.

I wouldn't mind owning U.S. stocks and being short of stocks elsewhere. I don't mind being long of the U.S. and short of Europe or long of the U.S. and short of Asia. But would I be a buyer outright? No. How do you see this whole tariff saga playing out? Do you think that as trade tensions escalate, it will have a material impact on either the economy or the stock market?

Gartman: Only if it gets worse than it is. It’s a slippery slope I hope we don't fall down upon and slide into economic uncertainty.

I hope, and I do expect, that cooler heads will prevail—that eventually, President Trump will see the error of his ways in demanding these tariffs. Trade protection rarely, if ever, through history, proves to be anything other than detrimental to economic growth.

Let us also hope that the Chinese pull back from the edge of the diving board. I think cooler heads will prevail, but one has to be mindful that something can go wrong. Gold has had a pretty dismal year, with prices down 8%, and last trading below $1,200/oz. Why has it been dropping, and is it a buying opportunity?

Gartman: Investors should have some of their assets in gold—5-10%. Owning gold in dollar terms for the first time in a while makes sense.

The fact that we have held above $1,190 for the past several weeks, even as the news on inflation here in the U.S. has been tepid, is supportive of the gold market.

We've seen enormous sales on the part of the Reserve Bank of Turkey. We know that the Reserve Bank of Venezuela has been a huge seller. The Venezuelans are probably down to dregs as far as their reserve holdings of gold are concerned, so there's probably not much selling to come from the Venezuelans. And I doubt the Turks are going to be an aggressive seller any further.

The forced sellers, for lack of a better term, have probably been sated. If you own 5% of your assets in gold, maybe you should raise that to 10%. To answer your question, gold is a far better buy than a sell—no ifs, ands or buts. Meanwhile, oil is heading the other way. Brent is close to $80 and WTI is over $71. Do you think it’s more likely to hit $100 or $60 going forward?

Gartman: I think we're more than likely to hit $85; I'm not sure that we'll hit $100.

The Saudis said they’d accede to $80 crude oil. I don't think they were talking about Brent; I think they were talking about the OPEC basket itself. The OPEC basket is about $76-77 a barrel depending on which day one looks at it.

That means oil prices could go up $3-4 before they get to $80. Markets tend to overshoot in both directions—maybe that means the OPEC basket can go to $82. But are we going to see $100? I seriously doubt that.

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