From today's Gartman Letter...... (11-18)

"As for the precious metals, we remain bullish of gold in Sterling terms, in EUR terms, in terms of the Yen and in terms of the US dollar. We are that way for we wish firstly to hedge out the short dollar aspect of the long gold position that seems incumbent in that position given the huge size of the dollar short position existing in the trading world. Secondly, being long of gold in various currencies keeps us mindful of the fact that the gold bull run is not predicated upon inflation but is instead predicated upon the notion that gold is becoming a “reservable” asset, accumulated by central banks in the stead of dollar, or EUR or Yen, or Sterling denominated assets.

In years past, the opportunity cost of holding gold as a reserve asset was high given that yields on short term debt securities were rather high and were rising, while the sum that one might earn by lending out gold was low and falling. Now, however, with the o/n lending rate at such low levels, owning gold and either hoarding it or lending it costs little if anything and the opportunity cost has dwindled to nothing. To that end, and although it is a small sale, we note that The International Monetary Fund sold two tonnes of gold to the Central Bank of Mauritius one week ago today. This follows the IMF’s sale of 200 tonnes of gold to India early in November. We think Mauritius’ purchase is simply one of many more than shall be announced over time as small countries… and large… take the IMF’s gold away and into their own reserves.

In the past, when bearish of gold, we would always say that “Why would anyone want to own gold that yields nothing and costs something to store when one could own a government security that yields something and costs nothing to store?” In the past that was wisdom and it secured gold’s bearish trend for a very, very long while. In the current world, that is no longer wisdom; it is idiocy. ”There is a time to every purpose under heaven,” as Ecclesiastes told us.

Finally, a conversation yesterday with a friend in NY, we were reminded of the huge option position taken by “someone” in spot gold at the $1200 strike price that expires in a week and one half. The seller of that option was comfortable until recently, but now as expiry approaches what seemed like a relatively riskless position now appears more and more risky instead. As liquidity dwindles next week because of the long US Thanksgiving holiday, and with gold moving ever closer to $1200, we wonder how uncomfortable the holder of that short position feels? Certainly less comfortable than when the option was sold several weeks ago."