After having reached multi-month highs recently, gold has been declining all day and earlier today took a sharp leg lower into the mid-$1240s.
Since there was no news to explain this weakness, we decided to look at the latest Gartman letter: because when all else fails, Gartman usually provides the answer. He did not disappoint, and this is what he wrote:
We remain long of gold in EUR and Yen denominated terms, just as we have for years in the case of the latter and for nearly a year in the case of the former. We are looking seriously… very… into adding to that position today for although we had intended to add to the positions had spot gold in US Dollar terms traded upward through… and remained “for an hour or so” above $1275… it seemed to us never to have been there for a definitive period of time. Yes, it did indeed trade above $1275, having made it to $1277 in the “spot,” but to the very best of our knowledge it did not remain there consistently. We’d have been a willing buyer at $1280 or higher had it been there and had it remained there for a reasonable interval… and although it was close to having done so it never seemed to us to have fulfilled this obligation.
Trading is art; it is not precise. It is rarely definitive. This was and is one of those times. However, we are intent upon adding to the position this morning on this correction and we shall do so “upon receipt of this commentary…” a far more “definitive” instruction than that of yesterday.
Conveniently, this may explain today’s gold drop. It does not, however, explain why last week, when gold was notably lower than the level this morning after the “correction”, Gartman said that “… we ran to cover our US dollar denominated gold position mid-day and we shall argue strongly that those still long of gold in US dollar terms, as noted above, should do the same.”
So with the move in gold “covered”, here is one attempt at explaining why stocks opened stronger today and still remain in the green. Once again, courtesy of Gartman’s daily letter:
At this point it would be ill-advised to suddenly turn bullish of equities but instead at this point it might even be rational and reasonable to consider reducing long positions and become more and more neutral of equities.
Questions answered.
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