From today's Gartman Letter...... (12-2)

"COMMODITY PRICES ARE FIRMER AGAIN as the weak dollar has moved to the center tage, and in the very centre of that stage are the precious metals which are soaring this morning. Was it really only three weeks ago that gold was pushing upward through $1100? Now we’ve pushed upward and through $1200, and perhaps more importantly we’ve pushed upward through ¥105,000, and through €800 and through £725… all psychologically and technically important levels and we’ve done so rather easily. We have been long of gold in Sterling and EUR terms for quite some while, buying our first units back in early August at what appears now to have been a rather fortunate low point in the on-going bull market. We bought our gold in foreign currency terms rather than in US dollar terms for we were convinced that the world was turning its back upon fiat currencies generally and that “investment” money would flow into gold in general terms. As “hedgers” and avoiders of risk, we wished to avoid the inherent dollar risk attendant to gold ownership, and we’d achieved that goal. What now appears to have been comical to others is understood by more and more market participants as a materially less risk-laden position.

However, as the chart of gold in Sterling terms at the upper left of p.1 suggests, even this trade is becoming extended, and as we approach £735-750 our propensity shall be to take quietly to the sidelines, allowing others to participate as panic buying begins to predominate. We are not prepared yet to stand aside, but soon we shall at least reduce our exposure. The phase for buying has ended; the phase for lightening up lies just ahead.

That having been said the gold bulls do have fundamental news on their side as the ECB, in its weekly statement of condition yesterday showed that there was no change in gold or gold receivables on the Bank’s books. The week previous, the Bank noted a sale of just 0.14 tonnes and for the previous six weeks there had effectively been no sales of gold under the Washington Agreement by the various “legacy central banks” of Europe. As our old friend, John Brimelow notes, this is “A far cry from earlier in this decade [and it is] Horrible news for the Bears.” Earlier this decade, the banks were rather aggressively selling 4 and 5 and 6 tonnes of gold each week. They’ve stopped doing so even though they've the “right’ under the Washington Agreement to be rather aggressive, capable of selling 450 aggregate tonnes of gold in the fiscal year from October-September. Thus far they’ve sold practically nothing, suggesting that they’ve either run out of gold to sell… which is just not true… or they’ve lost the appetite to sell. We’ll “go” with the latter. Remember, however, their collective or their individual timing has been suspect at best, for they were aggressive sellers $500 and $600 and $700/oz lower."