Dennis Gartman: 8% Gains Ahead for Gold
After moving to the sidelines earlier in the month, on Friday, commodities investor Dennis Gartman said it's time to take the plunge and go long gold.
“I’ve been out of gold for a period of time but I’m pulling the trigger – I want to come back to gold.”
Gartman’s call is both technical and fundamental.
Looking at the technicals, he likes the price action. “Gold consolidated for two weeks, but it just sat there; it didn’t give anything back. That means resistance that might have been a ceiling has been taken out.”
And Gartman says the fundamentals are bullish, too. Specifically, he expects demand to increase as investors seek the yellow metal as an alternative reserve currency. “What the Fed has done,” he explained, “and what the ECB must do will support gold relative to other currencies."
In other words, Gartman thinks moves to stimulate Western economies will debase currencies and as a result make gold all the more attractive.
“Monetary authorizes have made it clear they’re expanding supply reserves in the system – respond accordingly.”
It's worth noting, if you’re a nimble money pro, Gartman suggests playing the theme in euro terms. (In other words, a long position in gold versus a short in the euro.)
“I think gold goes to 1400 versus euro, that’s an 8% move higher," he says.
However, if you're an individual investor, Gartman thinks it's perfectly fine to establish a long position in dollars. "It probably gains about the same in dollar terms,” he adds.
And if you're thinking about buying the gold miners on this thesis - Gartman has some thoughts -- don't do it !
“Make a pure bet, buy the metal” he says,. "If you buy miners you can walk in and find out the company had a labor problem or the mine flooded. Miners will eventually outperform but I’d make the pure bet.”
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Trader disclosure: On Jan 27, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; 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 WFT; Grasso owns XLU; Karabell is long HON; Karabell is long CAT; Karabell is long QCOM; Karabell is long BIDU; Karabell is long VMU; Karabell is short JCP; Karabell is short XLF
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