Art Cashin, UBS Director of Floor Operations on the New York Stock Exchange, and Denis Gartman, founder and publisher of The Gartman Letter, each has their take on whether there's substance to gold conspiracy theories. Today on Talking Numbers, Gartman responds to Cashin's most recent comments.
Next to the moon landing and Area 51, the biggest conspiracy theory floating around the internet is that gold prices are manipulated by a cabal of central banks, large investment institutions, wealthy families, and Pete Rose.
Art Cashin thinks the conspiracists are playing a part in pushing the markets. Appearing yesterday on CNBC's Squawk on The Street, Cashin laid out the basis of the gold conspiracy theory and how it may have led to the recent run-up in gold prices. Cashin said:
"See, gold has been around for thousands of years and has been involved in some conspiracies. And you would think that some of the gold bugs would naturally opine into the conspiracy theory crowd. I'm not a conspiracy theorist. I think that tends to be the guy who picks the grey horse and, when the grey horse loses, thinks that race was fixed.
"That having been said, you have a couple of things going on here. There are theories going around about accountability for gold in storage, starting with the central banks when the Germans asked to see their gold back, etc., etc. It then morphed into the large international banks who, in many cases, are custodians for gold holdings, either through the ETFs or whatever. And, suspicion began to arise that maybe all the gold that was supposed to be there wasn't there. That prompted the conspiracy theory that maybe those big banks were having a bear raid on gold. Because if the price of gold goes down, people aren't so anxious to peek behind the curtain and see if you have everything you said.
"That got a little extra strength recently about what's called a backwardation of gold in which the current price is higher than the near futures price a month out or two months out. Now, normally, you would fix that by something called arbitrage, which would be: you would sell the higher-priced spot gold and buy the contract one month out and sit back on your hands and collect – actually a riskless thing. Nobody's really been doing it in size so that has fed more of the conspiracy.
"See, people don't think it's there, people think you can't get it picked up. And, along come the front-page New York Times article about large banks metals warehousing and hinting pretty strongly that maybe chicanery and manipulation. That, I think, got the gold bugs crazy and that helped prompted one of the most spectacular short-covering spikes and rallies we saw yesterday."
In other words, the type of people who fear gold manipulation are pushing the price of gold around like the type of people who are supposedly manipulating gold.
However, before Cashin's appearance, Dennis Gartman was also on Squawk on the Street saying, "I don't believe that there is a conspiracy out there to tighten the supplies of gold. Supplies of gold are simply tight."
Cashin responded, saying:
"I agree with the fact that we've seen backwardations. In fact, there was a gold backwardation in the middle of the crisis back around '08 or '09, I think. But, with all due respect to my very dear friend Dennis, when enough people believe it…. And, you have to remember, everybody's got their own little networks. They're all out there talking about it."
But, in case this is global conspiracy is real, Cashin doesn't think you can expect it to last a long time. "Manipulations going on for a long period of time are very rare," says Cashin. "You can ask the Hunt brothers about that. Things can go to an extreme and people will find a way to break them up."
Meanwhile, one chartist says Gartman's take on gold is rooted in technical analysis. "I'm sure Dennis would agree that the technician believes that the path of prices is not a product of news but rather a byproduct of the human condition," says Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson. "Greed and fear and supply and demand and support and resistance."
So, what does Dennis Gartman have to say to Art Cashin's challenge?
Watch the video above to hear Gartman's response and to see Richard Ross' chart gold's next move.