Dennis Gartman: I’m becoming more bullish on gold

Closely followed commodities investor Dennis Gartman said Friday he has become more bullish on gold as inflation picks up.

The Gartman Letter publisher said he previously liked gold only in yen and euro terms but is now "turning fundamentally bullish" even in dollar terms.

"I'm not a gold bug. I don't think the world is coming to an end. But I do think inflation is beginning to pick up incipiently at the margins," he told CNBC's "Squawk Box."

Gold is often held as a hedge against inflation, though some investors question its effectiveness as protection against rising prices.

Gold prices have risen about 4.5 percent this year. In March, the core personal consumption expenditure index — the Federal Reserve's preferred measure of inflation — rose 1.6 percent year over year.

Gartman pointed to consistent strength in grain and livestock prices as signs of sustainable inflation. A the same time, central banks outside the United States are buying up assets to stimulate their respective economies, he said. That asset buying typically produces higher prices.

"All those things being equal, all those things being summed up have to argue for stronger gold prices," he said."

Gold could get a boost even if the Fed keeps interest rates low, but only if other commodities continue to rally, Gartman said. The problem with low or negative interest rates is that they encourage people to take money out of banks and hold cash, which is deflationary, he added.

For inflation to continue running up, cash needs to remain in the banking system where it can be lent out, he said.

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