Gartman on the 'Mind Boggling' Gold Bubble

Dennis Gartman, author of the Gartman Letter and the frequent target of attacks by gold bugs (though not too much lately), thinks that gold is in a bubble but has no idea how big the bubble might get, growing ever larger "until it stops"./p>

That part at the end about "dancing while the music is playing" spurs memories of similar comments by hedge fund managers in early-2008. Hmmm...

This report at CNBC has a few more details:

"It is a gold bubble," Gartman told CNBC. He called the trade on gold "mind boggling," but also said he is currently long — or betting gold will go higher.

Gold hit a fresh record high above $1,130 an ounce early Monday as the dollar fell against other Western currencies.

Gold's Friday low of $1,102 an ounce is the floor, according to Gartman. If it falls below that mark, he suggests investors should "head to the sidelines."

The trend for the dollar is "still down" and will continue, Gartman said. It's an "unbelievably crowded trade," he added.

Gartman is famous for saying "buy what's going up, sell what's going down" (or something to that effect) and that helps to explain why everyone is selling the dollar these days - it's about the only thing that's going down.

Comments

[bobbybutte:]

as a person who has become financially independent SOLELY from allocating capital let me add some things here

Gold at these levels is not as agood a hedge in large cap multinationals which has moved in tandem with gold and provide cash flow

Nov 16 03:59 PM

[Dave Wrixon:]

Gold is a cyclical investment. It can never earn, it is only ever a hedge. What goes up must eventually come down, and then go back up again. Gold is ridding high at the moment, but the risk is that Bernanke will get his monetary policy straightened out to everyone's satisfaction. Pretty much zero risk for now.

Study what Bernanke said in his latest statement. :

"We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability. Our commitment to our dual objectives, together with the underlying strengths of the U.S. economy, will help ensure that the dollar is strong and a source of global financial stability."

Paraphrasing this a little, it means that he is happy for the dollar to slide to try to boost unemployment at long it does start to destabilize the market or signal a rapid upturn in inflation. Frankly, I don't think he could spot inflation if came with red flashing beacons, so I don't think there is any chance that he is going to do any to prevent a further decline on the dollar.

Of course you have the option to divest into other currency and more markets where returns are likely to be much higher but it is understandable that some are shifting to Gold. The only thing with the Gold play is that you have to know when to get out, because at some point people will start selling and the decline can be fairly swift once that happens, however, it will only occur in two events. The first is if inflation does not materialize. The second if the Fed cures the economy of hyperinflation. I think the Gold Bugs can sleep easy for now.

Nov 16 04:04 PM

[Graham and ...:]

Gold is not at mind-boggling levels when you consider the risks in the world. Humongous U.S. (and foreign deficits), and a chicane Fed looking to reflate at all costs. Not to mention Iraq, Iran, North Korea, and a host of other rogue nations. Plus a terrorist attack and a terrorist trial.

Nov 16 04:36 PM

[sdavid0419:]

At this point Bernanke is nothing more than a talking head. Congress has handed him two unfunded wars, a broke FDIC, a Social Security lock box full of IOU's that are due, broke pension guarantee funds. Like it or not Bernanke will be printing more and more money as far into the future as one can see. If the gold bubble is waiting for the money presses to stop before it stops it sure as heck won't be in my lifetime!!!!!

Nov 16 04:40 PM

[mwphnh:]

Gold is a bubble but it will not burst until rates start to go up.
Once there is a cost in terms of cash flow (gold pays no coupon and costs money to store and insure) than gold will decline.

Nov 16 04:55 PM

[roy piper:]

Isn't this the same guy who called Warren Buffett an "idiot" last week?

Nov 16 06:45 PM

[roy piper:]

"Gold is a cyclical investment. It can never earn, it is only ever a hedge. What goes up must eventually come down, and then go back up again."

Ummm. No. Gold itself does not really go up or down, your purchasing power does. Although gold can have it's swings in the short and intermediate term, over time it does not really go down because of currency debasement. Gold passed $45/ounce in the 1940s, $100 in the 60s, $200 in the 70s...it ain't EVER going back to those levels again. It will never go back to the $400/ounce you saw just 6 years ago because the government has flooded the world with dollars and the currency is simply not "worth it." I could see it dropping 20% next year, but over the very long term, it has a bright future given the dollars being printed like Monopoly money.

Nov 16 06:51 PM

[Angel Martin:]

Re: gold never getting back to $400.

I think this is a very risky assumption in what appears (so far) to be a disinflationary economic recovery.


On Nov 16 06:51 PM roy piper wrote:
>
> Ummm. No. Gold itself does not really go up or down,...
> ...It will never
> go back to the $400/ounce you saw just 6 years ago because the government
> has flooded the world with dollars and the currency is simply not
> "worth it."

Nov 16 09:20 PM

[test213:]

It is very simple. As long as the dollar moves lower, gold should be rising (given it is priced in dollars, and there is demand for it.)

But when the dollar reverses, gold's upside will be limited, or it may even reverse lower. Time will tell.

test213
admin: invetrics.com

Nov 16 09:35 PM

[mtt04:]

No people, gold is rising as an antithesis to EVERY currency!

You myopic dopes think in US terms. This is a simple and fundamental call on sovereign currencies,but, mostly yours.

Gartman is the dope (nor Warren) that's all.

That is what gold is saying, It is shorting Gartman - that is the best trade ever.

Nov 17 06:24 AM

[mtt04:]

Oh one more thing for the gold illiterate, gold doesn't provide return because it does't have to.

You dopes are so return driven that is why you get your head handed to you at every turn.

You keep gold for security and protection of your wealth. It is proven, documented, and undeniable. As much as the new soothsayers poo poo anything of value, you would be wise to have some.

Someone said you can't eat gold. Of course not, you buy the local bank or half the US with it after the collapse. Then you buy food.

Nov 17 06:28 AM

[mtt04:]

OH and one MORRRRE thing. Gartman has missed the gold cycle at every upturn for the last 8 years.

While we gold investors have feasted on the riches this guy was buying copper in 2007!

What does that tell you. Look at his mutual funds they are down 30-50%

I'm up 7000% in 1 year, I would say that beats the DOW. Oh but forgot, there is no return on gold.

There is if you know how to invest in it.

Go back to google. That is real value alright. A little white page in vaporware land.

Nov 17 06:33 AM

[DONE_SONZ:]

Another lousy prediction from Gartman.

Nov 17 06:57 AM

[DONE_SONZ:]

Mind boggling,bubble?Please.

Nov 17 06:58 AM

[ussmls7:]

Those that got physical gold & silver in 1999 are smiling as both will make new highs. More gold sold from the IMF on the 11th at a price $1105.66 to $1118.88. GATA.org has more on the sale!

Nov 17 09:53 AM

[5142152-337:]

Re: Gartman comment: Stupid is as stupid does. This guy ranks right up there with Nadler from kitco.com. Both beg the human race to believe them, when we KNOW they are androids from another solar system.

Dave Wrixon got it pretty much on target!

Nov 17 10:00 AM

[gebby:]

gold is not a crowded trade. when many of the doubters believe it it will be over. the commentating community has been skeptical of the gold rally for years. the rally has been slow. i dont see the blow off yet. maybe in 7 years. $3000- $5000 look at the charts.

Nov 17 10:43 AM

[Dave Wrixon:]

The dollar rising? Have you got hold of a thermonuclear device to put in the bowls of the Federal Bank?


On Nov 16 09:35 PM test213 wrote:

> It is very simple. As long as the dollar moves lower, gold should
> be rising (given it is priced in dollars, and there is demand for
> it.)
>
> But when the dollar reverses, gold's upside will be limited, or it
> may even reverse lower. Time will tell.
>
> test213
> admin: invetrics.com

Nov 17 12:53 PM

[Bundee:]

Gold in a bubble? Not likely.

How to really tell if there is a gold bubble-

www.commodityonline.co...

.... I showed folks how to perform the ultimate test of whether an asset is "too popular" or "in a bubble."
Here it is:

Ask 100 people on the street if they own gold.
See what they say.

Don't ask folks who read newsletter writers like Doug Casey or Porter Stansberry. Don't ask folks who you regularly talk investments with. Ask randomly chosen members of the public if they know why gold is "real money". Why gold has climbed from $650 to $1,100 in the last three years.

I guarantee you the average person on the street is going to look at you like you asked him which airline offers nonstop flights to Venus.

....When a bull market gets too popular, it looks like tech stocks did back in 1999. This was when everybody and his brother bragged at the office Christmas party about making a fortune in Cisco or Microsoft. It was when schoolteachers, personal trainers, and cab drivers suddenly became tech stock experts. Folks knew what "bandwidth," "routers," and "e-commerce" meant. Only when an asset enjoys that sort of widespread attention can you say it's too popular.

I can't say that about gold right now.

*******************

Also, take into consideration the price of gold and inflation over the past 30 years. How many things produced today are cheaper than they were in 1979? Energy? Food? Clothes? Beer?
Gold has a long way to go before it reaches a new bubble peak, in spite of the gold bears claims.

Nov 17 07:22 PM

[mtt04:]

How do you know when the bubble is topping?

When the drunken wife of my worst neighbor says she bought a junior miner that is guaranteed to be a 10 bagger.

Yup her hairdresser and waiter at the latte shop bought in too.

Yessir they have no where to go but up.
______________________...

We are quite far from that event yet. Actually another one might be when Kudlow says the world needs "king gold"!

LOL that one's kinda funny.

Nov 17 08:20 PM