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Gartman’s ‘Watershed’ Shift on Gold

Investor psychology on gold had swung too far in in one direction, and it's time for the precious metal to head higher, Dennis Gartman of The Gartman Letter said Monday.

"As markets change, it's always a technical circumstance," he said. "Rarely is it a fundamental change that gives you a shift in sentiment."

Gold traded down $2 per ounce, closing at $1,253.40.

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On CNBC's "Fast Money," Gartman noted that bearish sentiment had only gotten worse last week.

"You had an outside reversal day. You had absolute, abject panic. You had throwing overboard of positions. You had commercials on the futures market having their smallest net short positions — almost to the point of being net long — that we have seen in many, many years," he said, noting that gold prices had seen a 27 percent decline.

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"And when you listen to television, when you listen to the radio, when you read the newspapers, all you got were bearish implications for gold," Gartman added. "That's the sort of circumstance that gives you a turnaround, and I think you had it."

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Gartman also explained how large his conviction was.

"I use the term 'watershed' very rarely. It's the term that I use when I'm making a major change in sentiment," he said.

"And where do I think gold goes from here? Higher. Probably a great good deal higher. Probably several hundred dollars higher. Where am I wrong? I'm wrong at last Thursday's low. I think the risk/reward is probably to the downside $75, to the upside several hundred, maybe $300 or $400 higher, and I think the odds of success are far better than a coin toss. I'll take the trade."

(Read More: Why You Should Still Own Gold: Pro)

Trader disclosure: On July 1, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Pete Najarian is long AAPL; Pete Najarian is long INTC; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long IFE; Pete Najarian is long MRK; Pete Najarian is long BMY; Pete Najarian is long TCK; Enis Taner is long GS; Enis Taner is long ZNGA; Enis Taner is long SPY PUTS; Enis Taner is long FXE PUTS; Enis Taner is long WMT; Enis Taner is long CMI PUT SPREAD; Enis Taner is long UUP; Enis Taner is short SPY; Jon Najarian is long GDX; Jon Najarian is long GLD; Jon Najarian is long BBRY ; Jon Najarian is long GRPN; Jon Najarian is long ZNGA; Jon Najarian is long LEN; Jon Najarian is long XLU; Jon Najarian is long TMO; Jon Najarian is long TIVO; Jon Najarian is long TOLL; Jon Najarian is long WLL; Jon Najarian is long PAAS; Jon Najarian is long MAR; Jon Najarian is short NEM puts; Jon Najarian is short ABX puts; Jon Najarian is short AGQ puts; Tim Seymour is long BAC; Tim Seymour is long SBUX.

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