Dennis Gartman of the Gartman Letter is a little confused about the recent gold spike. The recent bull run he suggests doesn’t have any sense of frenzy to it. Or as he puts it:
Indeed there is a sense of the collective market being resigned to the fact that gold shall quietly make its way higher… a sense of quiet inevitability… rather than a sense of desperation or panic.
A reminder: gold briefly traded through $1,000 per troy ounce on Friday, but was off 2 percent on Monday.
Gartman, meanwhile, seems convinced of further downside to come (ik correction – as pointed out below this should in fact say Gartman seems unconvinced that a panicky spike and bust lies ahead). His reasoning? The rush of “cash for gold” type commercials on TV. As he explains:
Perhaps from an anecdotal perspective, one thing has our interest above all else: the commercials on television recently by the companies asking the public to bring their gold rings, jewellery, necklaces, heirlooms to them and get paid for the gold content are commercials beckoning the public to sell gold, not to buy it…the exact opposite of what one would expect at a panic top. After panicky, parabolic rises in something as focal as gold we’d expect the commercials to be enticing the public to buy, with the public following through and making the top as the public always does. This time the public is being asked to sell its gold. The difference is enormous.
The ads he is referring to are ones like these by “cash for gold“, where Americans appear encouraged to rob gold teeth off elderly relatives in a bid to raise cash. It’s not an exclusive phenomenon to the US either, note this website from GotGoldGetCash in Britain, which admittedly comes without the granny robbing endorsement.
Nevertheless, it all makes sense to us. If most of the population is more partial to debts than savings, chances are, rummaging through your grandmother’s incisors makes much more sense in staving off your personal bankruptcy than saving what pennies you have to buy gold bullion.
Of course, that’s not to say those who have savings aren’t frantically panicking exactly because it has come to this – a situation where old people’s teeth are becoming a collateral for meeting housing payments.
Related links:
A gold watch – FT Alphaville
Cash for gold USA commericial – Cash for gold