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Squawk on the Street

Metals Mania: Expect Gold to Continue Shining in ‘07

Investors who bought precious and base metals this past year struck pay dirt. Prices rose 18% and 63%, respectively. But while copper has reached a peak most likely not seen again for many years, a shift in monetary reserves from dollars to euros and gold will push that commodity even higher. So said Dennis Gartman this morning on “Squawk on the Street.”

If you’re not feeling any sharp pains of angst for missing out on the metals market this year, these numbers ought to do it: gold’s up 20%; silver, 30%; nickel and zinc, 150%; tin, 75%; and copper, 41%. It’s too late to buy into base metals now though. Gartman – who founded the Gartman Letter – says we’ve seen the highs in this sector.

About five years ago copper was trading at 40 cents a pound. At one point this year, the price was $4 a pound. Gartman quoted economist – and frequent CNBC guest – Brian Wesbury, who says, “High prices are the best fertilizer for a new crop.” Gartman expects copper to trade near $2.50 a pound on average going forward into 2007.

But copper’s in “almost everything,” said Erin Burnett, so it’s often a leading indicator for the economy. “It does do a very good job of forecasting economic circumstances,” Gartman said. Now that copper growth is slowing, it could mean the economy will continue to slow as well.

Gold, though, is seeing a jump not because of inflation or politics, said Gartman, but because central banks are switching their reserves from dollars to euros and gold. That is what’s driving the bid in the gold market.