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Posted by on Apr 8, 2015 in Market Insight

Dollar on the Mend?

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 US$ has rebounded nicely taking back a much of the losses it had suffered last Friday in what modest sums of trading took place anywhere in the world following the release of the US Employment Situation Report. The knee-jerk reaction to that report was precisely that: a knee jerk and seemingly ill-founded response that is now giving way once again to a stronger dollar across the board.

We maintain that the news last Friday was not nearly as ill as the initial response suggested, for the reality is that the US is running out of qualified, educated workers to fill the needs of businesses. We have a surfeit of unqualified, un-productive, ill-educated workers available to the market place, but they are unwanted, un-needed and wholly un-necessary. Well educated, qualified, punctual employees, on the other hand, are in demand and are in short supply. Sadly, we fear that we may be in for a period of several months where the non-farm payrolls are barely above 200 thousand when we had become comfortable expending 250+ thousand month after month after month.

Regarding gold, we are and we have been and we shall likely into the future remain bullish of gold, but again we are not bullish of gold in terms of US dollars for we prefer being bullish of gold in terms of currencies we think shall be diminishing in value. We prefer “funding” our gold position in terms of EURS and of Yen and that has proven to be the far wiser decision over the course of the past nearly two years in the case of the latter and over the course of the past six months in the case of the former. We know at this point that our argument seems somewhat monotonous for we’ve been consistent in our thesis, but even now we hear reports of the inadequacy or the unnecessary complexity of our thesis. Our thesis is not complex; it is simply that we wish to “fund” our position in weak currencies, avoiding “funding” them in the currency that has been and shall continue to be the world’s reserve currency that is and has been strong.

As spot gold in US dollar terms was trading to $1222, we thought there would be… and indeed there has been… resistance at that level and upward toward $1224. That resistance has proven to be reasonably formidable in the short term. It will continue to be reasonably formidable for a day or two or three longer, but support shall be evident at the $1210-1214 level as other commodity prices are firm AND as the gold trading community becomes convinced that the monetary authorities around the world have collectively embarked upon demonstrably easier monetary policies that will in the end engender inflation and will in the end offer strong support to gold.