From today's Gartman Letter..... (8-10)

"COMMODITY PRICES ARE WEAK, MOVING IN CONTRAVENTION TO THE US DOLLAR and no one is or should be surprised. Turning firstly to the gold market, we are long of gold, but we are long of gold not in US dollar terms but in terms of the EUR. Interestingly, although gold is weak in US dollar terms compared to where it was Friday morning when we marked it here in TGL, it is actually higher in EUR terms, and not immaterially so. Friday, as we sent TGL out to our clients around the world spot gold was trading $960.60, and obviously it is a good deal weaker than that this morning as it trades $954.65 as we write… or a loss of 0.6%. Gold in EUR terms, however, is actually a bit stronger, for it was trading €668.80 and it is trading €672.05 presently.

The chart this page detailing the price of gold in EUR terms over the past four years makes its case rather clearly: the trend is from the lower left to the upper right, and the market tends to consolidate its gains over a period of weeks before rushing to the upside once again. It will take a close above €700 to really get the market excited to the upside and to break out of the recent “triangle” consolidation patter that has been evolving over the past four or five months, but it is only a matter of time until it does so.

What we are seeing is a movement to gold as a reservable currency in the stead of the US dollar and the EUR. With the political problems attendant to the EUR these days with the Czechs now threatening not to sign the final treaty that has been years in the making, what is the propensity on the part of China, or Japan, or the Middle Eastern nations to buy EUR as a reservable asset when they can and will and are willing instead to own gold? We think that propensity is small and growing smaller, and as such we are sellers of the “reservable asset” they are selling... the EUR… and we are buyers of the “reservable asset” they should be buying… gold. We are strangely comfortable with this position, perhaps simply because so many laughed at the notion when we first suggested it, and they are laughing still. As the great Pete Stiedlmayer used to say during our days on the Chicago Board of Trade, “Do the hard trade.” Buying gold in EUR terms seemed hard, and it engendered laughter. Those two things proved the trade’s merit."

(Link not available as was rec'd by email from a TGL sub)