From today's Gartman Letter...... (8-20)

"Regarding gold, of which we remain long in EUR terms but not yet in US dollar terms, the World Gold Council reported yesterday that demand for gold in all terms fell 9% year-on-year, as demand for jewelry was especially weak relative to that of a year ago. Jewelry demand fell 22% from a year ago to 404 tonnes in the 2nd quarter from 517 tonnes last year; however, the WGC was quick to report that despite the fall year-on-year, quarter-on-quarter demand for jewelry was up from 345 tonnes in the 1st quarter of the year. Back then, as the world was seemingly swept away in massively bearish stock market movements and the fear that a global depression was upon, the propensity to buy gold was clearly dampened.

The Council noted that demand from Indian was especially hard hit, with gold off-take in the 2nd quarter down 38% from a year ago. Jewellery demand in India was down 31% from a year ago. Regarding Indian demand, the lack of rains in the monsoon may play a continued bearish role, for if the grain crops there are less than hoped for, the concomitant decline in farm incomes combined with the higher costs of food will work against total demand for gold. Yes, there will be inflationary implications to
be drawn from the higher crop prices, but that will not be sufficient to offset lower demand. So, gold, strangely, has become a “weather crop.” Who knew?

Finally, we’ve included a chart this page of gold in US dollar terms over the course of the past four years, and its history is rather clear: Gold rallies; then it consolidates into some tidy, geometric shape… usually a triangle of some sort as the bulls and bears fight with one another in some form of trading, trench warfare…and then it breaks out again to the upside. It takes months of consolidation before it is ready to move higher, and in the case of the consolidation from May ’06 through October ’07 it took a year and one half. The recent consolidation is only six months or so in duration, in terms of US dollars as well as in terms of the EUR. It will break out to the upside, in all likelihood, but when it shall do so is another question entirely. Probably when no one is looking, and probably when everyone has given up. It might well require a movement upward through €675-€685 before we get the movement upward through $1000. Indeed, we think that is precisely what shall be required. As we write, gold is trading €663.40… stable and boring."