August 1, 2016
Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.
Dollars are uncommonly strong; the US dollar is uncommonly weak and by that we mean that the Canadian, Australian and New Zealand dollars have risen sharply relative to the US dollar and relative too to the Japanese Yen, the EUR and most other currencies, while the US dollar has fallen very sharply indeed following the release on Friday of the surprisingly weak GDP figures. Note then the inordinate amount of “red” in table 1 of the forex market as the US dollar has fallen by more than 1% relative to the Yen, to the other “dollars,” to the Mexican Peso, the Brazilian Real and the Russian Ruble. Note too that the dollar has fallen quite sharply relative to the Chinese Renminbi, confounding Mr. Trump’s relentless series of statements that the Chinese have been and are “manipulating” their currency lower in order to wrest economic advantages from the US.
The monetary authorities in Japan and Europe really haven’t any choice but to adopt more expansionary policies. Yes, we shall admit that the Bank of Japan disappointed everyone mid-week last week when it chose not to adopt more aggressively expansionary policies, but the Bank has a very real problem: there are not enough government securities it can buy in the open market at this point and so it was forced into buying stock ETFs instead. Eventually, however, there will be legislature that shall allow for the creation of a series of perpetual debt securities and when that happens the BOJ will be there buying them, with those funds “helicoptering” into the economy. Gold will rise accordingly.