(Kitco News) - Gold prices are continuing their ascent into the heavens unabated, with the $3,000 target looming closer; however, one commodity investor says that he is not chasing the market.
In his latest note, famed investor Dennis Gartman, creator of The Gartman Letter, said that the gold trade is looking a little stretched.
“I remain long-term bullish on gold, but the trade is becoming a bit crowded,” he said. “For months and years, I’ve remained steadfastly bullish on gold, but of late, as gold has become more and more popular, I’m becoming marginally less enamored with it and have actually begun selling calls against what I own.”
The comments come as gold starts a new week with a new record high, with prices pushing solidly above $2,900 an ounce. Gold futures are up more than 10% so far this year, with April gold trading at $2,926.20 an ounce, up more than 1% on the day as of 8:45 a.m. ET.
Gartman took a similar stance in mid-October, warning investors that gold was due for a correction. Following the U.S. elections in November, gold prices dropped more than 7% and then consolidated until their recent breakout.
Back in October, Gartman told Kitco News that he recommended investors look for opportunities to buy gold during potential corrections.
Although gold is looking overbought, Gartman noted that economic conditions continue to support higher prices as recession risks remain elevated.
“Regarding the inversion in the yield curve, it has become very nearly economically axiomatic that recessions follow inversions, but the lag that exists between the onset of the inversion and the official onset of a recession has often been a year or more… and certainly it is now ‘more,’” he said.
Although the yield curve inversion has been a poor recessionary indicator this time around, Gartman noted that the cycle is not complete, as the inversion has only just reversed with the curve turning positive again.
“We know that through modern post-World War II history, when the curve ‘dis-inverts’ after previous material inversions, recessions have followed rather hard upon,” he said.
At the same time, Gartman noted that President Donald Trump’s ongoing tariff wars will add to the already elevated economic uncertainty. He noted that tariffs will push inflation higher and drag activity down.
“For those in the U.S. who voted primarily based on inflation and the economy, they had better buckle up because the bad news is coming,” he said.
“If President Donald Trump fulfills two of his main campaign promises — mass deportations and tariffs — then we will likely see a return of higher costs and selective but very real shortages, starting at the grocery store.”
