All Eyes Turn to Europe
March 7, 2016
Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.
The forex market is generally quiet, with the EUR and the Yen effectively unchanged from the levels marked here on Friday ahead of the US Employment Situation Report and following the political developments over the weekend here in the US and ahead of the elections this coming weekend in Germany. The focus for the next several days shall of course be the ECB’s monetary policy committee meeting and the focus there shall be upon the Bank’s forecasts for economic growth and inflation… both of which shall almost certainly be “low” numbers.
We look for the Bank to report that GDP growth in the Euro-zone this calendar year shall be cut from an already dismaying low 1.7% to 1.5% or even perhaps lower, while inflation is virtually non-existent with the Bank likely cutting its forecast from 1.0% to 0.5%. If we are wrong on the latter we are high.
Focus then shall be upon Draghi & Company and what they can do and what, of course, they shall do. The Germans on the policy council want to do nothing. Fearing inflation even as deflationary forces are deployed around the zone, the German contingent on the council…led as always by Mr. Weidman… wants the Bank to take no further action.
Turning to gold, the People’s Bank of China has been in the market of late buying gold, as evidenced by the news that it added 9.95 tonnes of gold to its reserves last month. The PBOC has been rather relentless of late in adding to its gold reserves, more than offsetting the news last week that the Bank of Canada has sold off all of its remaining gold reserves at the demand by the Finance Ministry there. We shall “bet the over” in the favor of the PBOC vs. the Bank of Canada in the months and years ahead then.