From today's Gartman Letter...... (11-23)

"Regarding gold, it “gapped” higher over the weekend; that is, in the modern world where trading takes place 24/7, “gaps” are rare, and can happen when and only when prices close firmly in N. America on a Friday and then “gap” higher in early trading in New Zealand, Australia and the other Asian trading centres on the following Monday. That is precisely what has happened. Gold closed Friday afternoon at $1148 and opened in Asian dealing at $1158 and has not turned back, leaving a huge gap on the charts. How powerful is that gap? Very! What are we to do with that gap? Add to our positions, for we’ve no choice. We pay heed to gaps, and history has proven that to be wise. So add we will.

Concerning gold prices in other foreign currencies other than US dollars, our positions engendered loud and consistent laughter several months ago when we turned once again to owning gold in Sterling terms, or in terms of the EUR and recently in terms of the Yen. The laughter is receding, thankfully, and it is doing so as gold had moved to new multi-year highs in terms of Sterling and is very close to doing so in terms of the EUR and the Yen. Owning gold across the currency spectrum has effectively hedged out the dollar exposure that one has when owning gold solely in US dollar terms, and as a hedger by nature we like this sort of position taking.

Thus, we note that in August, gold traded at approximately ¥90,000 and that now it is trading at or near ¥103,000. In early August, when we first turn positive of gold again, it was trading approximately €665 and as of the close on Friday it was €776. In Sterling terms, back in early August, gold was trading ¥163;585 and as of Friday’s close it was trading ¥63;697. Gold in US$ terms was then $940 and it was, as of the close on Friday, $1149. Thus gold has risen, since the first of August, approximately 14.4% in Yen terms; 16.7% in EUR terms; 10.1% in Sterling terms and 22.2% in US$ terms. Clearly it has risen more in dollar terms, but in “risk adjusted” terms, having hedged out the dollar exposure, the ability to sit tight and add to the winning trade has fallen upon the shoulders of those long of gold in more than one currency. It is proven wise.

Russia announced late last week that it bought 15.5 metric tonnes of gold in October, bringing its total to 19.5 metric tonnes for October alone. Russia, according to the official press release, has been adding to its reserves of gold over the course of the past two years, having purchased 69 tonnes of gold in ’08 and 90 tonnes so far this year and is now the 8th largest holder of gold in the world amongst the central banks, ranking just above the Netherlands and just behind the Central Bank of Japan. Including the recent purchases, the Central Bank holds 658 tonnes of gold in reserve.

Further, the Central Bank said that “It would be appropriate to hold 10 per cent of reserves in gold.” If so, that would mean that the Central Bank intends to bring its gold holdings eventually to 12-13 thousand tonnes, or twice what it presently holds. Thus the question is how swiftly shall Russia move to get to 12-13 thousand tonnes of gold? By next year; within five years? A decade perhaps? We’ve no idea other than Russia will be a consistent bidder for gold long into the future."

Dan