Dennis Gartman made some gold-bullish but euro-bearish comments on Bloomberg on Friday. He sees the play in gold as less about fear and more about reserves, specifically the euro. He says that central banks in China or Indonesia are going to be sellers of euros reserves and buyers of gold reserves at the margin. While he didn’t give a price target for gold, he did say he sees it a lot higher than its current level around $1250, an all-time high. On the euro, he went so far as to say that the Euro was a `Completely Doomed’ currency.
(video embedded below)
While the U.S. dollar has been strong of late, we should not forget it was at $1.50 to the euro just months ago. I see the dollar as fundamentally weak given the Fed’s ability and willingness to print money.
So what has happened since then? With the euro crisis and European credit easing, people have awoken to the fact that the euro is also a fiat currency and that the Europeans may be willing to depreciate the value of their currency as well. As I see it, the rise in gold’s value has a lot to do with paper currency revulsion (something that may eventually hit gold ETFs down the line I might add).
A piece I ran last summer Soros: ‘the dollar is a very weak currency except all the others’ encapsulates my thinking on the issue.
By the way, Gartman makes some fairly aggressive comments at the end about a non-existent north-south divide in fiscal affairs. I should point out that the canard that the Northern Europeans are so much more fiscally responsible than the Southern Europeans is absolute rubbish. Look at Germany’s deficits over the past decade and look at Spain’s (Spain is the perfect example of a country that never should have joined the eurozone).