Timing & trends

Gartman Bullish on Gold as Miners Cut Production

Posted by Dennis Gartman via Hard Assets Investor

on Wednesday, 19 February 2014 16:49

Dennis Gartman is the man behind The Gartman Letter, a daily newsletter discussing global capital markets. For more than 20 years, The Gartman Letter has tackled the political, economic and social trends shaping the world’s markets, and Gartman himself is a frequent guest on CNBC, Bloomberg and other financial media outlets. HardAssetsInvestor Managing Editor Sumit Roy recently caught up with Gartman to discuss the gold market and the four new gold ETFs he is involved with.

HardAssetsInvestor: I recently read that you turned bullish on gold. What’s the reason for that change?

Dennis Gartman: Yes, I’ve quietly turned bullish on gold for a few reasons. Firstly, beginning five and six weeks ago we started to see a lot of the mining companies— even the largest gold mining companies— begin to curtail production. That’s always a sign of an end of a bear market. 

When senior management at the largest gold mining firms throw their hands up in dismay and begin curtailing production, usually within weeks the lows are going to be found. Decision by committee is always that way. It’s slow; it takes time; and it’s always late. 

Two, I don’t see any major reduction in accommodation that the Fed is pushing into the system. We are far from tightening; we are still aggressively easing, with $65 billion still going into the system between each FOMC meeting. Yes, that’s down from $85 billion, but still, those are massive injections of reserves into the system. The Bank of Japan is doing even more than the Fed. 

Thirdly, supplies are tight. The fact that gold futures moved to a very modest backwardation indicates how tight deliverable supplies of gold are. And finally, when you go and speak at “gold bug” conferences, the populations are down by 40%. That tells you something. Throw all those things into the pot, stir them around a little bit, and it tells me it’s time to be bullish.

Gold prices have gone down, and the market has beaten prices up about as much as they can. Bad news came out several times; you’ve had gold being downgraded by multiple brokerage firms, and it didn’t break.

HAI: Like you said, gold hasn’t reacted to bad news. The Fed is actually tapered two times, which you would think would send gold down, but instead it’s rallied.

Gartman: It’s rallied. I think that’s impressive. 

HAI: I also read a statistic that China’s gold demand was up 41% last year?

Gartman: That’s a big number. Whether one believes it or not, let’s cut it in half. It’s still a big number.

HAI: Right, it’s huge.

world-mine-production-2012Gartman: Let’s say, well, I might not believe the statistics. OK, cut it in half and it’s still a big number. That’s impressive. If you look through and see where the gold is coming from, it’s coming out of Switzerland; it’s coming out of Hong Kong across the border; it’s even coming in surreptitiously. So one has to view that as being reasonably positive.

….read page 2 HERE

Hard economic times had kept Amy Derose and her husband Lawrence locked in an unhappy marriage for the sake of their engineering firm inPompano Beach, Florida.

“The business was hanging on by a thread and we had to hang on,” said Derose, 53, who had been married 35 years and worked as the business manager. “We couldn’t afford to split. He needed me in the business and I needed him.”

With Florida’s economy and housing market recovering, “we are definitely on the upswing” and revenue is rising at their 24-employee company. That is allowing the couple to move forward with their divorce this month after years of showing up to work as if nothing were wrong personally. Now, she is looking for a job and “couldn’t be happier.” – full article HERE

The dollar hit a seven-week low against the euro on Wednesday and its lowest level this year against a basket of currencies, weighed down by soft U.S. data ahead of the release of minutes from the Federal Reserve’s latest meeting.

The euro rose as high as $1.37735 during Asian trading, its strongest level since January 2. The dollar later gained ground, leaving the euro last trading down 0.1 percent at $1.3744, with equity markets offering investors little direction.

Tuesday’s New York manufacturing and U.S. housing data were the latest numbers out of the United States to disappoint investors, increasing pressure on the dollar.

The numbers bolstered the case for the Federal Reserve to be patient in its tapering of its huge bond-buying program, ahead of the minutes from the January policy meeting when the Fed opted to trim asset buying by another $10 billion.

British Columbia on Tuesday provided long-awaited details on a new income tax for its nascent liquefied natural gas (LNG) industry, as Canada’s westernmost province released its second consecutive balanced budget.

The coastal province is eyeing a two-tier tax that would apply to income from the liquefaction of natural gas, the process of cooling gas into a liquid to be transported by ship, at facilities in British Columbia.

The first tier, set at 1.5 percent, will apply as soon as commercial production is achieved, while the second tier, pegged at up to 7 percent, would kick in once the operator has recouped the capital investment related to building the LNG facility.

Premier Christy Clark has prioritized the development of LNG export terminals along the rugged Pacific coast, which she has said could boost the provincial economy by as much as C$1 trillion and create some 100,000 jobs over the next 30 years.

Energy regulators have so far awarded seven export permits, but no final investment decisions have been made and production is still years away, prompting some to question the feasibility of the province’s big bet on LNG.

Producer prices rose for a second straight month in January, pushed up by an increase in the cost of goods, but there was little sign of a broad pick-up in inflation pressures at the factory gate.

The Labor Department said on Wednesday its seasonally adjusted producer price index for final demand increased 0.2 percent last month, the largest increase since October.

Prices received by the nation’s farms, factories and refineries had edged up 0.1 percent in December.