Quiet Market, Important Implications For Gold
December 28, 2015
Dennis Gartman has been directly involved in the capital markets since 1974 and has been publishing his daily commentary, The Gartman Letter, since 1987. Mr. Gartman is a strategic partner with the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN) and lends his institutional insight to educate advisors and investors about trading gold in different currency terms.
The forex market is rather quiet as one would expect with the dollar rising very modestly relative to eight of the twelve currencies we mark here each morning and falling relative to four of the others compared to the levels prevailing on Thursday of last week. Volumes have been light, as one would expect, and the news has been inordinately light also… again as one would reasonably expect. Indeed, the only major economic news is out of Japan where Industrial Production fell 1.0% month-on-month in November. This was well below what had been expected on The Street in Tokyo, which was closer to -0.6%. Further, this was the first such decline in Industrial Production since late in the summer.
Further still, retail sales, year on-year in Japan were also rather surprisingly weak, falling 1.0% compared to an expected drop of 0.6%.
Between the decline in Industrial Production and the weakness in Retail Sales, we suspect that the Bank of Japan’s authorities are reconsidering their most recent decision to hold their expansionary policies steady. That is, the Bank announced two weeks ago that it was doing to press on with the addition of ¥800 billion annually to its balance sheet but this was a disappointment to us and to many others for we had all expected the Bank to expand that sum rather substantially. Instead, all that the Bank said that it would do would be to “expand” the universe of assets it could buy, including a new series of ETFs that it hopes will be created.
Regarding Europe, the news there is limited also, with the only major economic report from very late last week coming from France where the number of French unemployed fell in November by 15,000 from October’s new all-time high. According to the French authorities there were 3.5748 million unemployed French workers in November, down from 3.5898 million in October. However, this was still up 2.5% from a year ago and worst of all was the note from the report that the average time spent unemployed in France is up to a stunning 570 days… a new record.
Regarding gold…it is weaker, and where $1055-$1065 has proven to be strong support in US dollar terms, $1075-$1080 is proving equally formidable resistance. We feel convinced that gold is forging long term support that could and should hold, but until such time as the resistance noted here is taken out handily to the upside we will sit tight. We are, however, fearful that the malevolent “forces” at work so many times in the past may choose to use the current low levels of liquidity extant at the year’s end to lead yet another foray to the downside, trusting that the lows shall hold again.