Gold Moving Toward Global Reserve Status

Gold is likely to trade in a range of $1,225–$1,100 for the remainder of this year, says Newsletter Writer Dennis Gartman. He dismissed fears of a second dip into recession for the U.S., saying: "while it is not impossible, it is highly unlikely given the man at the helm of the Federal Reserve."

Rather, Gartman expects to see the U.S. economy and global economic circumstances quietly getting better; but, he cautions, the era of 4% and 5% GDP growth in the U.S. probably won't be seen again for a very long period of time.

"What is disturbing to me is that the monetary aggregates, despite what everybody wants to tell you, are simply not growing. The adjusted monetary base, which is the aggregate I pay the most attention to, has gone sideways; in fact, it's even slightly lower since last October." He argues this is not what we should be seeing; and while the base exploded to the upside in 2007, 2008 and 2009, he believes that explosion was a response to the banking crisis "that money has to remain in the system, perhaps almost permanently."

"I would rather see very quiet 3%–4% growth in the adjusted monetary base, which would be correlative with 3%–4% GDP growth. Instead, we are seeing negative growth and that, to me, argues for deflation—not inflation. It argues at best for tepid slow, economic growth and I would prefer to wait and see. . ."

What does this mean for gold? If this scenario plays out, Gartman doesn't expect too much from gold. . .probably "simply go sideways." But, he adds, "Gold is quietly becoming a reservable asset and, honestly, in 10–15 years, the USD, gold and renminbi will be the major reservable assets. Take that as you wish."