Can Gold and the Miners Benefit from Equity Volatility?
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 and lends his institutional insight to educate advisors and investors about trading gold in different currency terms.
Gold has shown strength recently and it has done so rising in all currency terms, not only relative to the US dollar, but relative to the Japanese Yen, the EUR, Sterling, et al. As a result we remain, as we have in the case of Gold/Yen for more than two years and in the case of Gold/EUR for the past several months, long. Ralph Waldo Emerson once said that the “Foolish consistency is the hobgoblin of a little mind,” but in the world of trading/investing a proper consistency is the proper end result of correct analysis.
Note then that Gold/EUR has recently traded above €1049/oz. and that that is well above the once strong, psychological resistance of €1000/oz. that had proven so formidable but through which we had expected gold eventually to rise. As gold has risen through the resistance in EUR terms, it has continued rise in terms of the Yen, and we remain steadfast in our thesis that we wish to own gold in the currencies most likely to weaken as the monetary authorities in Japan continue to expand the balance sheet there at the Bank of Japan, while the monetary authorities at the ECB shall have no choice but to do precisely the same once a methodology of doing so is properly chosen.
We are all the more impressed with gold’s recent performance in light of the fact that mining shares have performed even more impressively. We have maintained that one of the hallmarks of a confirmed bull market in gold is leadership taken by mining shares and certainly they’ve taken that leadership role in the course of the past several months, but have especially done so in the course of the past several weeks. One by one by one the leading mining shares have done far better than has gold bullion in any currency valuation method. Many have finally actually… finally… moved upward through their longer term moving averages and in some instances those averages themselves have begun to run higher, signaling broad, underlying strength, strengthening our bullish resolve on gold generally.