Dennis Gartman: Action in Gold Says Next Stop $1500

On Monday, the traders were keeping a close eye on gold after the precious metal tumbled the most in nearly three months.

The move caught many off guard considering a European summit failed to restore market confidence and borrowing costs in Italy and Spain rose.

If gold were a safe haven, jitters about the European crisis should have sent the precious metal higher. But it didn’t. “Gold tumbled like a risk asset,” says trader Steve Weiss.

”It’s a sign that gold is moving on the dollar ,” adds trader Steve Cortes.

In other words the action may signal a growing belief that the euro will get weaker and by default the dollar will get stronger. (Typically a stronger dollar is negative for commodities.)

In fact, dollar strength has triggered a slew of technical breakdowns in gold. According to esteemed commodities trader Dennis Gartman, “We’re making a string of lower highs. As a result we could see gold trade back to $1500 even $1450 in US dollar terms,” he says.

Here’s why.

----------------------------------------------------------------------

> NEW SLIDESHOW: Slo-o-o-w Money, 10 Top Stocks for the Long-Term Investor

----------------------------------------------------------------------

Gold Plunges Below $1,700
Gold Plunges Below $1,700   

”A lot of investors are now caught owning gold because they thought the problems in Europe would give a boost to the gold market,” Gartman explains.

“Instead, now they’re caught with a position they established at levels well above where gold is trading now.” They will have to sell to minimize losses ahead of year’s end.

As bad as that sounds for the gold bugs it’s equally bad for equity investors. “With gold trading like a risk asset, if gold trades down to $1500 it will take the S&P with it,” says Weiss.



______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment, but not have it published on our Web site, send those e-mails to fastmoney@cnbc.com.


Trader disclosure: On Dec 12, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Kelly is long IWM; Kelly is long LNG; Kelly is long EUR; Kelly is long CHF; Cortes is long; Cortes is long Treasuries; Cortes is long INTC; Cortes is long SVU; Cortes is long TSN; Cortes is short; Cortes is short AUD; Cortes is short EUR; Cortes is short GBP; Cortes is short AAPL; Cortes is short DB; Cortes is short Crude; Grasso owns ASTM; Grasso owns AVAV; Grasso owns BA; Grasso owns D; Grasso owns LIT; Grasso owns MHY; Grasso owns PFE; Grasso owns PRST; Grasso owns S; Grasso owns XLU; Weiss owns EUO; Weiss owns JPM; Weiss owns QCOM; Weiss owns HPQ; Weiss owns GM

For Steve Grasso
Stuart Frankel & Co and its partners own CSCO
Stuart Frankel & Co and its partners own CUBA
Stuart Frankel & Co and its partners own GERN
Stuart Frankel & Co and its partners own HPQ
Stuart Frankel & Co and its partners own HSP
Stuart Frankel & Co and its partners own HSPO
Stuart Frankel & Co and its partners own MET
Stuart Frankel & Co and its partners own MU
Stuart Frankel & Co and its partners own NYX
Stuart Frankel & Co and its partners own PRST
Stuart Frankel & Co and its partners own RDC
Stuart Frankel & Co and its partners own UAL
Stuart Frankel & Co and its partners own XRX

For Simon Baker
Simon Baker OWNS Abbott Labs

For Urs Dur
Lazard Capital Markets LLC makes a market in FDX securities.
Lazard Capital Markets LLC makes a market in UPS securities

For Mark Fields
No disclosures

For Colin Gillis
Investment banking (next 3 months): BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report.

Lead or Co-manager: BGC Financial LP and/or its affiliates, has not acted as lead or co-manager in a public offering of equity and/or debt securities for Amazon within the last 12 months. BGC Financial LP and/or its affiliates has not received compensation for investment banking services in the last 12 months from Amazon.

For Dennis Gartman
Gartman is short Euro
Gartman is long equities

For Craig Berger
FBR acts as a market maker or liquidity provider for the company's securities: INTC.



CNBC.com with wires.