Camped out in my Long Beach hotel room (for my sister-in-law’s first wedding of the week…yes, wedding 1 of 2), I just caught Dennis Gartman on CNBC, giving is take on today’s bloodbath in the gold market:
”I pay great attention to something technicans call an outside reversal – that is, the market made an all-time new high – closed on the lows of the day – then closed below the previous day’s lows. If you don’t pay attention to that and don’t liquidate you’re going to find yourself in a lot of trouble.”
In fact, Gartman is putting his money where his mouth is.
”I sold a lot of gold in the last 54 hours – I wish I hold sold everything and I wish I was short.”
Of particular concern is that the general public probably got into the gold trade during the later innings. “The public owns gold at a high prices – and now any rally will be met with sellers,” Gartman says.
And he also thinks big hedge funds will be damaged by the sharp decline. “Hedge funds who are in this trade are losing huge amounts of money in gold” – and that too could generate liquidation pressure.
His comment on the hedge funds is very interesting. Open interest on gold is, I believe, at all-time high levels. Could be a massive scramble to get out of this trade unfolding.
Personally I am more sympathetic to gold in the longer term than Gartman is – who described gold’s recent action as “one of the great bubbles of our time.” While maybe a near term top, I’m not buying that it was a blow-off top for the ages – I would expect that’s still to come.
Either way, gold went parabolic over the past few months (as we discussed over the weekend) – so the pullback should be a pretty gnarly one. All the better, it’ll give us a chance to pick up some physical at lower prices.
Gold’s parabolic move – which has sharply reversed! (Source: StockCharts.com)