Dennis Gartman, the economist and editor of the Gartman Letter who correctly forecast 2008’s commodities slump, cut his gold position by half today and said yesterday’s drop makes him “nervous” that it may keep falling.
The metal fell as much 1.3 percent yesterday after earlier this week trading within 1.8 percent of the all-time high a month ago. Gartman cut his gold holdings in all currencies. Gold in euros and British pounds rose to records since last week.
“For the first time in a very, very long while, we are a good deal more nervous than we have been about the trend,” Gartman said in his Suffolk, Virginia-based Gartman Letter. “We fear that yesterday’s sharp break that took gold down to $1,520 in the veritable twinkling of an eye was the harbinger of even more severe weakness that might soon develop.”
Gold may fall “swiftly” to about $1,480 an ounce as early as the next few days, he wrote. Gold for immediate delivery dropped $6.27, or 0.4 percent, to $1,527.30 an ounce by 1:07 p.m. in London.
Gold has gained 7.4 percent this year and touched a record $1,577.57 an ounce on May 2 as faster inflation, Europe’s debt crisis, a weakening dollar and unrest in the Middle East and north Africa boosted demand for a protection of wealth. European Union and International Monetary Fund officials today complete a review of Greece’s plan for 78 billion euros ($113 billion) in asset sales and austerity measures as they prepare the nation’s second bailout in little more than a year.
While gold has gained the past 10 years, the longest winning streak since at least 1920, central banks are adding to their gold reserves for the first time in a generation. The IMF sold 403.3 tons of bullion as part of a plan to shore up its finances and lend at reduced rates to low-income countries.
“There are rumors and there are rumors of rumors about IMF sales, or sales on the part of legacy central banks in Europe, or sales from the European Central Bank, the proceeds of which can be used to prop or bail out Greece and the others,” Gartman wrote. “Although these are merely rumors, where this is rumored smoke there can be actual fire.”
Gartman, who last week said gold is the preferred “coin of the realm” during Europe’s sovereign-debt crisis, today said that he had added “marginally” to his gold position yesterday. “Such is trading,” he said.
The Standard & Poor’s GSCI index of 24 commodities plunged as much as 66 percent in the seven months through February 2009 after Gartman in June 2008 said there would be a “tidal wave” of selling. Gold gained as much as 2.5 percent after the economist said he was adding to positions on May 20.