Gartman Says He Sees Gold Becoming The World's Reserve Currency

Far East and European trading were a non-event on Monday... and gold was down a couple of dollars by the time that New York opened. The smallish rally that began at 8:45 a.m. Eastern time, came to an abrupt end the moment that the London p.m. fix was in... and it was all downhill from there... with selling continuing into electronic trading after floor trading was through for the day. From its high of $1,060.80 [spot] to it's New York close at 5:15 p.m... gold was down about 22 bucks.

Silver's price path was similar... except the sell-off was bigger... continuing right until the moment that floor trading closed. From it's London p.m. gold fix high, silver closed down about 70 cents. That's a lot. Kitco shows the low price tick for silver as $16.98 [spot]... down 3.40%, compared to gold's down 1.59%.

Needless to say, the precious metals shares were not amused.

I also note that the U.S. dollar began a rally at the precise moment that gold and silver were at their price zenith at the London p.m. fix. Coincidence??? Not bloody likely! It wasn't much of a rally, but it was enough for the purpose required. However, the usual N.Y. gold commentator remarked... "Although the brief dollar rally triggered gold's slide, there was real selling, as gold lost 7 Euros intraday."

This was typical bullion bank action at the usual times. Today is options expiry for the November contract... so, after yesterday's fireworks, I'm expecting more down-side action today. I knew that last week, and should have mentioned it, but didn't... as November is basically a nothing month for delivery in either metal. I thought it would pass without much fanfare, but I was wrong. Options expiry for December [23 November] should prove to be far more interesting... as December is a huge delivery month for both metals.

Open interest changes for Friday [as provided by the CME's own website] show that open interest in gold actually fell 3,324 contracts. Volume was reported as 161,006 contracts... with total gold o.i. down to 503,374 contracts. I had said in my Saturday column that I expected open interest to have risen on Friday. Other quoted open interest numbers I've seen around the Net say that Friday's gold o.i. was actually up about 6,300 contracts. Whom to believe? I will get to the bottom of this by tomorrow. The silver open interest numbers were not in doubt... as all commentators agreed that o.i. rose 1,129 contracts on largish volume of 42,286 contracts. Total silver o.i. now stands at 136,892 contracts. The gold o.i. numbers are on the same page as the silver o.i. numbers. How other commentators came up with + 6,300 when it plainly shows -3,324 is beyond me. That's a huge difference... 9,600 contracts worth.

The usual N.Y. gold commentator was more than unhappy with this dichotomy regarding gold open interest... and spent a few paragraphs on it in his commentary... mentioning that Reuters was reporting gold o.i. up 3,324 contracts... not down 3,324 contracts. Obviously the Reuters reporter has a momentary lapse. The NY commentator and I have exchanged information, and hopefully this situation has resolved itself.

The CME Daily Delivery Report for Saturday showed that 104 gold contracts will be delivered today... nothing for silver. The GLD ETF showed a minor decline of 39,224 troy ounces... and as per usual, there were no changes in SLV. Over at the Zürcher Kantonalbank in Switzerland, their weekly update showed that a smallish 10,876 ounces were removed from their gold ETF... and 85,746 ounces were withdrawn from their silver ETF. I thank Carl Loeb for those numbers. The U.S. Mint had no updates in either gold or silver eagles yesterday... and the Comex-approved depositories showed that a respectable 578,587 ounces were taken into inventory.

The usual New York gold commentator had a fair amount to say during the last few days... "In a somewhat disturbing development, Friday’s Gartman Letter displayed some enthusiasm for the gold story: When the "Jeremiads" of the "Hard Money" disdainful right-wingers become the order of the day, times are difficult at best. But we shall have to admit that the anti-deficit brawling of the "Hard Money" crowd that seemed for the past many decades to be nothing more than screeds is now coming true... now their wailing and gnashing of teeth is serving their followers well, and rather than being the fact that stopped clocks are right twice a day, perhaps those on the "Hard Money Far Right" are on to something as the deficit does not simply rise, it explodes."

"This is part of TGL’s current thesis that the $US is undergoing a major re-rating courtesy the Obama Administration. While at first glance gold’s friends might be heartened by signs of support from this very sensitive gauge of sentiment amongst professionally managed investment pools, the history is that actual gold enthusiasm by TGL has quite often immediately preceded heavy Bear raids. Comfortingly in this respect, TGL made no addition to its gold long." [That didn't help yesterday! Gartman's record remains 100% intact... the gold price got smacked! - Ed]

"Early on Monday morning, local Vietnam gold stood at an $18.36 premium to world gold of $1,056.92 (Friday $17.37/$1,059.80). Efforts are being made to persuade the authorities to modify the ban on gold imports; no doubt smuggling is underway. See final lines of the vnbusinessnews.com story linked here."

"India was an importer all of Monday... but just barely. This was a respectable performance, as the rupee softened 0.3% to close at $1=$46.645 and the stock market closed down 0.42%. Reuters carried a story this morning headlined "India gold traders pick up bargains as prices ease"... and the link is here."

"Although TOCOM open interest slipped in Monday morning trading... the public added 1.382 tonnes to its long."

"Western dealer-related comment on gold is distinctly more nervous than previously... and at present, a bear push seems to be underway. Euro gold and $US gold are staying close together. India will be delighted by this weakness. Estimated volume at 10AM was a moderately heavy 53,320 lots."

"Naturally, the gold shares were hit hard. The HUI closed down 4.29%... and the XAU down 3.85%... both close to their days' low. The Central Fund of Canada bullion vehicle closed with only a 6.3% premium to NAV... a recent low."

"Interestingly, kilo bar in Turkey this morning... according to the Istanbul Gold Exchange... rose to a $10.25 premium to world gold of $1,055.20." [That's a lot! - Ed]

"This morning [Tuesday] local Vietnam gold leapt to a $26.73 premium over world gold of $1,040.70." [I would bet serious money that gold smuggling is the fastest growing business in Vietnam at the moment. - Ed]

I have a list of stories that would choke a horse... so some of them are just going to have to wait until tomorrow... or later in the week when I can squeeze them in.

The first is a gold story from the Saturday edition of the The Telegraph in London. The headline reads "Gold gives a precious insight into economy". "What a strange and fascinating commodity gold is – a store of value that is no one's liability, which cannot be printed or debauched by governments but which, with no income stream, has no objective value. A simultaneous hedge against both deflationary slump and inflationary spiral, it is little wonder gold should be the investment of choice for the Armageddon crowd." The link is here.

The next story is courtesy of Craig McCarty. It's a piece from zerohedge.com... and the headline reads "Sheila Bair Addresses a Worried Nation". The message is "Trust us... because we are your government." As the writer says "Try not to get motion sickness and vomit." One of the posted comments below the video states that she's using an "old Jedi mind trick!" I wonder what really bad news is coming down the pipe? The link is here.

Interviewed Friday on CNBC's "Fast Money" program, Gartman Letter editor Dennis Gartman said he sees gold becoming the world's reserve currency and the dollar continuing down for the next year while being very oversold for the moment as gold is overbought. Gartman remarked that "gold bugs" don't like him, but if he makes a few more television appearances like this one, they might start to get over it. Gartman's remarks about gold begin at 2 minutes and 42 seconds into the interview, and you can watch it at the CNBS Internet site linked here.

Here's a gold story sent to me on the weekend from reader Lesley Legrand in Adelaide, Australia. The opinions on where the gold price is going is about the same as it is in North America... but this has an Australian spin [and a wonderful photo!] and the article, posted at new.com.au is headlined "Beginner's guide to investing in gold" is worth the read... and the link is here.

It must have been a slow weekend for James Turk over at fgmr.com, as he posted a couple of items over at this website. Both contain his usual excellent charts... and both are definitely worth the read. The first is entitled "A True Picture of the US Dollar"... and the link is here. The second short piece is entitled simply "Gold". James point out that... "end of months are always very tricky because of option expiry. The gold cartel writes a lot of calls in their market interventions aimed at capping the gold price. As a consequence, they often bomb gold at month-end so that as many of their calls as possible expire out of the money, thereby enabling the gold cartel to earn the entire premium." Well... guess what! The link is here.

The next item is one that Casey Research's Jeff Clark slipped into my inbox very late last night. It's a story that appeared over at marketwatch.com last week... and is definitely worth your time. The headline reads "Death of 'Soul of Capitalism': Bogle, Faber, Moore... 20 reasons America has lost its soul and collapse is inevitable" There's not a thing in here that surprises me... and the link is here.

And lastly is this video interview from mid October that was sent to me by reader, Brad Robertson. It's a two-part video posted at youtube.com. It features Max Keiser... and it's a 12-minute interview with Dr. Michael Hudson... financial and economic advisor to the government of Latvia. Latvia is in crisis... big time!!! If it goes down the drain, the domino effect in the former Soviet-bloc countries could get ugly. I'm not a fan of Max Keiser at all... as he's too full of himself to suit me... but what Dr. Hudson has to say is well worth your time. The link to the first part of the interview is here... and the link to the second part is here.

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists. - Ernest Hemingway

Neither gold nor silver did much of anything in the Far East during their Tuesday trading day... although both metals have started a slight downward trend beginning at the usual 4:00 p.m. Hong Kong time slot... 3:00 a.m. New York. Volume in both metals is pretty decent... 2,827 contracts in silver, and 13,349 in gold [December contract] as I write this.

Silver's price 'drop' yesterday took it almost half-way back to its 50-day moving average... which currently sits at $16.32. Here's the 1-year silver chart.

As for gold, the 50-day moving average has now made it above $1,000... and sits at $1,003.74... which is about $40 from where we are now. It remains to be seen how serious the bullion banks are going to get about covering their grotesque short positions. It wouldn't take much more selling pressure by the U.S. bullion banks to get the ball rolling down the hill at a much faster rate. Today's activity in New York should give us a pretty good clue.

See you tomorrow.