From today's Gartman Letter....... (8-14-09)

"COMMODITY PRICES ARE HIGHER … and we are risking sounding inordinately redundant here this morning for we’ve said this far too many times already… as the US dollar weakens. Pari passu, as the dollar weakens, commodities’ prices in US dollar terms rise. Unless there is some overwhelming fundamental reason to do otherwise, that is how the game is played these days; that is how the game has been played previously, and that is how the game shall be played going forward. There are high and rising inventories of copper out there, just as there are high and rising inventories of aluminium, and crude oil, and natural gas, but it makes no difference at the moment for the weak dollar is the trumping card being played upon the other cards dealt upon the table.

To that end we draw everyone’s attention to the chart of gold in US dollar terms at the bottom left of p.1 this morning. We need to be rather cavalier about $10 movements in the price of gold for they are random in nature. $10 higher or $10 lower is nothing in light of this chart. They happen all the time, and they shall continue to happen; but what must needs be taken away from this chart is that a huge, multi-month consolidation has been forged. The battle between the gold market bulls and the gold market bears is being waged, but on a steadily smaller field. Each side has inched its way closer to the other, to the point now where both sides can see the “whites of the other’s eyes.” Like the trench warfare of the 1st World War, one side soon shall vanquish the other; one side soon shall have the other on the run, and when that side is determined, it shall be our duty to join the fray and fire upon the loser.

As Jesse Livermore once so presciently said, it is not our duty as speculators to be on the bull side or the bear side but upon the winning side.

Our propensity is to believe that the bullish side shall win this battle eventually, and our propensity then is to buy gold rather than to be short of it. Were it not so crowded already we’d have already joined the bullish camp, but it is crowded and we are fearful that too many own gold and need to be liquidated out before the well capitalized bulls seize control. Hence, we are long of gold in EUR terms as a way to keep ourselves involved but to be somewhat hedged at the same time. When gold breaks out to the upside… or when gold in dollar terms tests the lower end of the consolidation… we’ll buy gold in US dollar terms readily and aggressively. Until then, however, we stand hard upon the sidelines, echoing those lines of our old friend, Mr. Bradley Rotter, which we’ve made somewhat famous, “I’m flat and I’m nervous.”