Dennis Gartman, the editor and publisher of The Gartman Letter, has made no secret of his disdain for gold. But he believes a good trader is agnostic of everything. So, when technical charts indicated it was time to buy, he did. In this interview with The Gold Report, Gartman talks about how he has been playing gold off of other currencies to turn a profit and discusses if he is ready to get into gold equities yet.
The Gold Report: Dennis, in late July, you told CNBC that you're a "buyer of gold" after being what amounted to the grand marshal for the gold bear parade. Why did you change sides?
Dennis Gartman: Simply because the gold bear parade had gotten a bit overcrowded. It was actually quite astonishing to me. Everybody was overtly and manifestly bearish of gold. If I've learned anything in 40 years, it's that when things get terribly one-sided, it's probably time to go to the other side. Gold had reached some technical levels that I found interesting, but more important, it had reached a level of psychological bearishness that pushed me off the sidelines, off from being bearish of gold, to being bullish.
TGR: Have you taken some ribbing from your colleagues as a result of that position?
DG: I found it amusing that I was taken to the woodshed because gold went down another $15/ounce from where I bought it.
TGR: While you are buying gold, you told CNBC that you're not a true believer. What's holding you back?
DG: The true believers in gold—the goldbugs, the folks who think that the world is coming to an end, that gold is the be all and end all, that money should be backed by gold—I'm not of their religion. Good traders are agnostic of everything. They look at numbers simply as something dancing across the page, as cleanly and as unaffectedly as they can, buying the things that look cheap and are starting to go higher, selling the things that are high and are starting to move lower and not caring a wit about what it is that they are trading. Most people who trade gold are true believers. They believe that gold is the be all and end all. I could care less.
TGR: In another interview, you said that you're bullish on gold in yen terms versus gold in U.S.-dollar terms. Could you please flesh out the difference?
DG: First of all, let's understand that gold is nothing but another currency. Yen is a currency. The dollar is a currency. The euro is a currency. That's all it is.
Having grown up as a currency trader, I was always taught to trade one currency against another. One is long of Canadian dollars, short of yen. One is long of euro, short of British pound sterling. One is long of gold, short of yen.
I'm long of gold, short of yen for the very simple reason that the Bank of Japan, under the new regime of Prime Minister Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda, has made it abundantly clear that it will do everything within its power to expand the bank's balance sheet over the next year and to weaken the currency over time.
It's been a far better trade over the last two years than being long of gold in U.S.-dollar terms. Gold in yen is down 1% over the last two years. Gold in U.S.-dollar terms is down 28%. I think down 1% is better than down 28% almost any time.
TGR: Has gold in U.S.-dollar terms bottomed?
DG: Gold in dollar terms likely has not bottomed. Gold in dollar terms has been a bear market since the autumn of 2011. Each low has been lower. Each high has been lower. Until that trend changes, it's a bear market.
Prices have been moving from the upper left to the lower right. I haven't learned many things in 40 years of doing this, but if something has been moving for two and a half years from the upper left to the lower right, the odds are next month it will have moved even lower to the right. No, gold has not seen its low in dollar terms.
TGR: What has caused that two-year decline?
DG: Too many goldbugs. Too many people hoping that there will be a continuation. Although they take Federal Reserve Chairman Ben Bernanke to task for what he does, they hope he will continue because they hope that the expansion of monetary aggregates gives rise to higher inflation. They have been abundantly wrong about that—it has not. It may eventually, but it hasn't thus far. Because it hasn't created the inflation that the goldbugs wanted, they continue to buy gold. They find themselves in an uncomfortable and losing position, day by day and hour by hour.