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Posted by on Jul 24, 2015 in Market Insight

Greek Healing

Greek Healing

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 situation regarding Greece has settled back a bit and that we think is a very, very good thing for what more can be said about Greece, the Brussels’ Group, the ECB, the IMF et al that has not already been said?

At this point, Mr. Tsipras has gone back to Athens and is trying to “sell” the Greek people on the deal he has gotten from the Brussels’ Group and that shall be a very difficult sale indeed. Further, he will be trying to patch together a coalition in the Greek Parliament that shall insure the continuation of his government and shall keep him in the Prime Minister’s post as his left wing has cast him aside but as the centre and centre-right parties seems amenable to forging a better relationship with him and with the more centrist members of the Syriza Party.

Too, Ms. Merkel has a lot of political work to do to patch up her relations within her own party, and especially as relations between her and her Finance Minister, Mr. Schäuble, have frayed at bit. In the end, however, Germany’s leaders, at the behest of the German industrialists and exporters will do what they can and what they must to assure that Greece remains within the EUR-zone politically and within the single currency economically. As we have said perhaps countless times and perhaps far, far too often, BMW, Audi, Thyssen Krupp, Mercedes, Bayer et al will do what they can to assure that Greece remains in the single currency for they know all too well that a Greece-less EUR shall be a strong EUR and they want/need/demand that on balance the EUR be kept weak instead.

As for the Yen, we note something we think passingly interesting: the strength of the US dollar’s movement higher is obviously losing stamina. Yes, the dollar is moving higher and yes the Yen is moving lower, but they are struggling to do so these days. A movement for the US dollar down from 124.40 back to 122.50-122.75 would not be at all surprising.

Gold continues its plunge lower, falling well below the psychologically important $1100/oz. level in US dollar terms and making its way, it seems to us, inexorably toward the “obscene number:” $1000/oz. Gold is even weak in non-US dollar terms, although for the year-to date, ownership of gold in Yen and/or in EUR terms far out-performs the ownership of gold in dollar terms. However, relative performance in a bear market is still a losing proposition and there really is little else that must needs be said.

Year-to-date, gold in EUR and Yen denominated terms, when averaged, is down 2.26%, while “spot” gold is down 7.92%, so the “outperformance” by gold in EUR and Yen terms is material… 566 bps relative to spot gold. But again, one cannot “eat” relative performance.