Dennis Gartman, the economist and editor of the Gartman Letter who correctly forecast 2008’s commodities slump, said he will buy more gold when the metal falls to between $1,500 an ounce and $1,525.
Bullion climbed for 11 straight days before reaching a record $1,610.10 yesterday, the longest streak of gains since July 1980, and touched all-time highs in euros and pounds this week. Gartman last week said he cut his bullion holdings by about a half as “too many people have joined the trade.”
The metal is “looking vulnerable to the downside,” Gartman said today in his Suffolk, Virginia-based Gartman Letter. The drop “in the great scheme of things would be inconsequential as to the validity of the long-term bull move in gold. It would return the market to relative health by taking the latest longs out of their positions and it would bring us back to the market as buyers again of that which we had sold.”
European leaders will meet in Brussels tomorrow as they struggle to resolve the European Union debt crisis that helped boost demand for gold as a protection of wealth. Debt concerns in the U.S. also helped the metal gain 12 percent this year and head for a 11th straight annual increase, the best run of gains since at least 1920. Gartman said yesterday that the recent price run means “a correction of serious consequence is coming.”
The metal has beaten the 2.7 percent gain this year for the MSCI All-Country World Index of equities. The Standard & Poor’s GSCI Index of 24 commodities is up 11 percent and treasuries returned 3.7 percent, according to a Bank of America Merrill Lynch index.
Gold for immediate delivery traded at $1,587.50 an ounce by 9:59 a.m. in London and was last at 1,119.36 euros and 985 pounds. The metal may decline to about 1,080 euros and 960 pounds, Gartman said. He owns bullion in euros, pounds and yen.
Bullion’s advance earlier this week lifted its 14-day relative strength index, a gauge of whether a commodity is overbought or oversold, to 74.24. Some analysts who study technical charts view a level of 70 or above as a signal of a potential impending drop.
The Standard & Poor’s commodities index 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.