26 Sep 2017
by Jan Skoyles, GoldCore:
– ‘Commodities King’ Gartman sees $1,400 gold surge in months
– “Gold is the one currency that will do the best of all…”
– Pullback below $1300 “is relatively inconsequential”
– Use gold price weakness to be a buyer “no question”
– Bullish on gold due to central banks and easy monetary policy and gold will be even higher in euro terms
– Gold will be the best of all, as a result of QE and expansionary policies
– Dalio reconfirms belief that ‘gold serves a purpose’ and portfolios should have exposure
– ‘Gold is a diversifying asset’ says Dalio
– Own allocated, segregated gold in Zurich or Singapore
Editor Mark O’Byrne
Dennis Gartman has called 2017’s gold rally and he is now forecasting gold will be “demonstrably higher” rising to $1,400/oz in the coming months and rise by even more in euro terms.
In an interview on CNBC, he said that the recent correction in gold is but a mere pullback prior to much higher prices and “gold is the one currency that will do the best of all.”
Earlier this year Dennis Gartman, of the Gartman Letter, successfully called this year’s gold rally. In the year-to-date the precious metal is up by nearly 13%, thus outperforming the S&P 500 which is 12% higher.
“A year from now, gold will be demonstrably higher than it is right now…I would certainly think we could see $1400 [an ounce] in dollar terms.”
Gartman’s prediction comes a few days after another respected investor, Ray Dalio, called for gold to be held in portfolios.
Both Gartman and Dalio encourage gold investment as they believe it is an excellent diversifier and will be among the best performing currencies.
Their comments came following an intense week both political and economic developments, across the globe.
Signals from central banks – nothing to see here?
Last week the U.S. Fed made clear that it is still on track to raise interest rates by the end 2017.
Gold stumbled as tighter monetary policy is seen to raise the opportunity cost of holding bullion.
This is not a cause for concern, says Gartman:
“This is a correction but let’s understand the last rally that we had took off from $1200 to $1370. The fact that we’ve fallen back below $1300 I think is relatively inconsequential,”
Why is Gartman so bullish on gold?
“The monetary authorities are all still remaining expansionary…In that instance, the one currency that will probably do the best of all is gold.”
Gartman says this despite the announcement by the U.S. Federal Reserve and previous comments from other central banks. Clearly, he argues, balance sheet unwinding is not going to happen immediately.
“[It] is going to take five or six years. This is not something that will occur overnight,”
As we explained last week following the Fed’s announcement, the plan to hike interest rates and reduce the size of its balance sheet does not make for a happy ending.
According to 100 years’ worth of data (provided by Incrementum Capital Partners via Frank Holmes), increased rates and a reduction in the balance sheet has historically preceded recessions.
A recession would likely kill the business cycle. Frank Holmes explains why this makes a case for holding gold in your portfolio:
Gold has historically shared a very low to negative correlation with stocks. Consider 2008, the height of the financial crisis: US stocks ended the year down more than 37 percent, while gold held its value, returning 3.4 percent.
So it is not surprising that Dennis Gartman remains bullish on gold. For the next five-to-six years the Federal Reserve, along with the Bank of England and European Central Bank (to name a few), will be seeking to do the impossible – undo all of their decade-long decisions without screwing up the economy even more.
The case for gold is clearly strong in the long-term, and just as much so in the short-term thanks to a certain ‘dotard’ and ‘Rocket Man’.
North Korea thinks Donald Trump is mentally deranged…
“Just heard Foreign Minister of North Korea speak at U.N. If he echoes thoughts of Little Rocket Man, they won’t be around much longer!”
Whilst markets’ concerns over North Korea have apparently lessened over the weekend, the last week has been full of machismo demonstrations from both sides.
Gold had a bit of a take-down following the Federal Reserve meeting however North Korea’s threats to test another hydrogen bomb, promptly increased support for the safe haven.
President Trump unimpressed UN attendees last week, referring to Kim Jong-Un as a the ‘Rocket Man on a suicide mission’. In response the North Korean Foreign Minister told the UN Trump was “mentally deranged person full of megalomania” and also on a “suicide mission”.
The U.S. decided a fly by of U.S. bombers would be a good way to demonstrate ‘strength’ whilst the North Koreans marched on Pyongyang against President Trump.
Gold plays a significant role during times of political and economic uncertainty. Whilst many argue that the war-of-words between the US and North Korea is nothing new, this is the first time we have seen actions escalate to this level.
Those who believe this is nothing new are perhaps assume things will ease off between the American ‘dotard’ and the North Korean despot.
When you look back at various events between 1976 and 2009 that have prompted a cause for concern for regarding North Korea, the gold price has declined.
This year however we have seen the price rally. This is because there are many positive factors in the gold market but also because the stakes are higher. With each tweet, statement, military demonstration and rocket test, the uncertainty increases significantly.
We have not been in a situation when a U.S. President is able to broadcast his thoughts with immediate effect to the world (including his enemy). Nor have we ever known North Korea to have the military capabilities it is so keen to demonstrate.
Gold thrives on uncertainty.
We are certain about the uncertainty
We are at an interesting juncture.
Data tells us that it is highly unlikely that central banks will successfully unwind without causing harm to the global economy.
Data also tells us that gold performs well as a safe haven during times of war and geopolitical upheaval.
However, there is no data to tell us how everything will play out. This is where uncertainty comes in.
Central banks are going to start unwinding, but we do not know how badly it will go wrong. North Korea will continue to try to destabilise the region and the U.S. but we do not know how far they will be allowed to get.
Gold will perform well in the coming months. If you want to be certain of its protection in a world of uncertainty, then you should own physical gold – allocated and segregated coins and bars – in the safest vaults, in the safest jurisdictions in the world.
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