Dennis Gartman: Gold Puts In Short-Term Low

June 05, 2012

Gold guru says reduced short and long positions, need for cash have pushed the yellow metal down to a new short-term bottom.

[This interview previously appeared on and is republished here with permission.]

Dennis Gartman is the man behind The Gartman Letter, a daily newsletter discussing global capital markets. For more than 20 years, The Gartman Letter has tackled the political, economic and social trends shaping the world's markets, and Gartman himself is a frequent guest on CNBC, Bloomberg and other financial media outlets. HAI Managing Editor Drew Voros spoke with Gartman from his Virgina offices about gold’s recent moves, emerging markets and the closing the Brent-WTI price spread.

Hard Assets Investor: What’s your take on what gold is doing right now?

Dennis Gartman: A lot of people have been taken out of their positions. You can see the change in the makeup of open interest. Speculators have reduced their positions by more than 100,000, 125,000 contracts. Their long positions have been reduced to minimal levels. On the other hand, institutions that tend to be naturally short have reduced their positions by the same amount. So the stronger hands are less short; the weaker hands are demonstrably less long. And I think you’ve seen a low.

HAI: Gold also doesn’t seem to have its inflation hedge?

Gartman: Well, first of all, there’s not much inflation to be concerned about, at least if you believe the government’s statistics, and the market has to take the government’s statistics as face value. So if you’re looking at gold as a hedge against inflation, there isn’t any inflation.

And it is bothersome also that if you look at the monetary aggregates — and the one aggregate that I look at is the St. Louis Fed’s adjusted-monetary base. It has been falling since last June, and falling rather sharply. Those who think that inflation is going to be created by rising monetary aggregates are simply wrong. That’s not a problem to be concerned about for the reasonable foreseeable future. And to be quite honest, the foreseeable future is probably — let’s see, this is Monday the 21st — the foreseeable future is Monday, the 28th.

HAI: What is the biggest influence on gold right now?

Gartman: I think it’s uncertainty and marginal liquidation. I think it’s weakness in stocks that has forced the selling of something and I think stocks are inordinately cheap. I don’t think they’re going to get much cheaper. As stocks have fallen, sometimes investors are being forced to sell things they would not like to sell. And you almost always can sell gold. It’s always liquid.

HAI: What is your take on the Treasury market right now?

Gartman: Everybody thinks it’s ready to drop, and it continues to go up. It continues to make newer highs. Rates continue to make newer lows. And anybody who is short has had uncommon discomfort over the course of the past three years, two years, one year, one month. You can write this down: The bond market will break when it breaks. And it won’t break an instant before then. And if you miss the top by a month and a half, if you miss the top by two months, if you miss the top in the bond market by six months, you’ll be fine.

HAI: What do you see as a safe-haven investment right now?

Gartman: I’m amused that people call gold a safe haven. It’s not a safe haven.

HAI: Why do you say that, because of the volatility?

Gartman: It’s because of the volatility, absolutely. Safe should be nonvolatile. There are very few things that are nonvolatile right now. The only thing that seems to be nonvolatile is Treasury securities of less than one-year duration.


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