The Fed Says The World Is Getting Flatter
October 12, 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.
There had been a great deal of talk that the debate regarding “lift-off” of the Fed funds rate had been close; that is, the consensus was that the vote to hold rates steady at the September meeting was only a vote or two away from erring hawkishly. Now, however, we know that not to be true; that the dissenters were few and that the majority voting in favour of holding rates steady was not only large, it was resolute.
The FOMC’s focus upon economic concerns outside the borders of the US has been growing apace in recent years and although the Fed’s mandate is to concern itself solely with US economic concerns, with the greater importance of international trade and with the even greater and more swift dissemination of news from abroad which can and will weigh heavily upon the national collective psyche the FOMC members have no choice but to take into consideration what has and is and may in the future be happening to the economies in Asia and Europe. The world is truly inter-connected. What happens in Shanghai affects what happens in San Francisco, and what transpires in Bremen affects Birmingham and Boston. The FOMC minutes now make that clearer, and the members of the committee have no choice but to make decisions in these lights.
Finally we shall begin paying a bit more attention to the premiums… or discounts… that Shanghai gold has to the nearby gold futures traded on the COMEX. That premium earlier this month had been out to $6-7/oz., up from $3-$4/oz. back in August but it has settled back to the $3-$4 range in these past few days. A widening of the premium seems to indicate a willingness on the part of Chinese buyers to bid for gold, and it shall take renewed and enthusiastic support for gold from both the Chinese and the Indians… the two largest buyers of gold year-on-year… to truly push the gold market higher.