Economist Dennis Gartman Is Cutting Gold Position in Half

Dennis Gartman, the economist who correctly forecast 2008’s commodities slump, is cutting his gold holding by half after prices yesterday reached a record before closing below the previous day’s low.

Bullion rallied to $1,681.72 an ounce yesterday as turmoil in financial markets boosted demand for the metal as protection of wealth. It then closed down 0.9 percent as some investors sold the metal to cover losses in other markets. Gartman this week said the gold market has become “more and more crowded,”as holdings in exchange-traded products climbed to a record.

“The gold market ‘reversed’ yesterday, making new all-time highs and then closing on its lows and below the lows of the previous day,” Gartman wrote today in his Virginia-based Gartman Letter. “In the past this has always marked any number of various market highs and certainly we do not think that gold is any different.”

Gold climbed today and headed for a fifth weekly gain as global equities dropped and commodities erased their gains for the year on concern the U.S. recovery is faltering. U.S. and European debt concerns have also pushed the metal priced in euros and pounds to all-time highs. Gartman owns bullion in those currencies.

Immediate-delivery gold traded at $1,664.93 by 11:27 a.m. in London and is up 17 percent this year. It’s heading for an 11th straight annual gain, the longest winning streak since at least 1920. Holdings of the metal in ETPs climbed to 2,182.6 metric tons yesterday, the most ever, data compiled by Bloomberg show. That’s more than all except four central banks hold.

’Wise To Liquidate’

“Given the circumstances prevailing in a world that shall put a premium high upon liquidity we think it is wise to liquidate our gold holdings,” Gartman said.

Gold’s advance this week lifted its 14-day relative strength index to above 70, a signal to some analysts who study technical charts of a potential impending drop.

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. The gauge fell as much as 2.6 percent today, wiping out its 2011 gains, and was last little changed.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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<when he stops beating his head against the wall, we'll ask him for a comment>