Jittery investors are keeping a close eye on the materials sector which was the biggest drag in the S&P Tuesday due to a sharp slide in metals.
But of all the declines nothing seems to have rattled investors quite as much as the decline in gold.
The negative action immediately calls to mind the 2011 prediction made by Doug Kass on CNBC’s Fast Money in which he told us gold would plunge by $250 an ounce in a 4 week period.
Of course Kass can be dramatic to an extreme, so for further insights we turned to one of the most esteemed commodity traders in the nation – Fast Money friend Dennis Gartman, author of The Gartman Letter.
Gartman tells us he thinks fears about the sell-off are overblown. “Can gold go down $100 from its high? Sure. But will it do enormous damage to the long-term upward trend in gold. Not really.”
However, if you’re a trader the sell-off may present some opportunity. Gartman also says the downtrend in gold could last through much of January.
”It creates fear in the longs and joy in the people who are short,” and as a result it generates short-term momentum to the downside. “I wouldn’t be surprised (to see) the correction last 2 or 3 weeks.”
But for investors with a long-term time horizon, what matters most is the long term trend and in gold that's from the lower left to the upper right, a positive trend.
And Gartman is putting his money where his mouth is.
”I remain bullish of gold in non-US dollar terms,” he tells us. “No, Tuesday action wasn’t fun. But do I think the bull market in gold has ended? Not really.”
Meanwhile the Fast Money traders see the declines a little differently.
Joe Terranova is bearish on gold in the near term. “I think the story has changed,” he says. “The charts may be setting up for a head and shoulder formation,” a typically bearish pattern.
Jon Najarian has spotted a large buyer of puts in the GLD . “All the way down to the 115 strike,” he says. “I don’t think that’s somebody buying protection. That’s suggests someone is taking a shot at a large correction.”
