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(Kitco News) -
Gold’s post-banking-crisis breakout has failed miserably, and it’s put gold bulls back on their heels, according to legendary commodity investor Dennis Gartman.
“[Gold] appeared for a short while to have decisively broken out to the upside following the banking crisis involving Silicon Valley Bank, PacWest et al,” Gartman wrote in his latest investment letter. “It has failed badly since.”
He did acknowledge that the SPDR Gold Trust ETF (GLD) is still managing to hold above its 200-day moving average near $172, “and as long as that obtains I shall remain supportive,” he said, “however there is no question but that my enthusiasm for gold has suffered as GLD has fallen from just over $190/share in early May to $180 presently. ‘Tis enough to shake the faith of the most ardent bull.”
Gartman also noted that the number of barrels of WTI crude needed to buy an ounce of gold “is presently 28.4:1 down from 28.5:1 two weeks ago,” after peaking at near 90:1 in early 2020 and bottoming out at 5:1 over 10 years ago. “Gold is becoming cheap again, or crude is expensive,” he said.
He also looked at the Bitcoin/Gold Ratio, noting that the precious metal has held up better than the top cryptocurrency in recent weeks. “As of mid-week this week, 12.9 ounces of gold will buy one Bitcoin compared to 16.5 ounces two weeks ago as both gold and Bitcoin have fallen but as gold has done better.”
Turning to the week’s biggest economic news event, yesterday’s Fed rate decision, Gartman said the central bank surprised no one when it left the Fed funds rate unchanged, “but did surprise a large number of market participants by raising its ‘Dot plots’ rather hawkishly.”
He said the Federal Reserve Governors appear to be all on the same page, as the hold was unanimous, and markets shouldn’t expect rates to come down anytime soon.
“Mr. Powell at the previous meeting and again yesterday did leave open the possibility that perhaps this is not the terminal rate and that it will be quite some very long while before rates turn lower,” he said. “Perhaps not until some rather long while into ’24.”
He added that the Fed has left itself the latitude to raise rates further as early as July, and maybe even again in August.
