The year of the gold – again?

In terms of gold, next year will be as good as bad last year was – says Dennis Gartman, famous editor and publisher at CNBC, and portfolio manager and investor renowned across America.
In the interview he gave us, he warned not to be optimistic about the oil market. He expects the appreciation of the dollar, the American economy to stagnate, and he also thinks that Europe may fall into recession. Most capital market developments revolve around the current geopolitical challenges and the responses given to them – at least, according to the founder and owner www.gartmanletters.com, the financial-economic portal.

Péter Zentai: What did you learn from the first trading day of the year? Can it be assumed that the whole year will be the same: a tendency of falling exchange rates in the world’s capital markets?
Dennis Gartman: Weakness and frailty on the first working day have proved to be a bad omen. It is an extremely typical correlation for the world exchange markets, and less typical for stock markets. However, Monday’s developments are psychologically worrying; the big falls will certainly influence trading in 2016…

Yesterday China said: the trouble is greater than what Peking officially conveys.
Even though, I do not support the idea that the Chinese economy can crash within moments, I presume that it will perform far below expectations: instead of the predicted 7 percent, there will be only 4 or 6 percent growth at most. This can significantly set back the performance other national economies.

Mostly the raw material and oil markets?
A long time must pass on the raw material markets to allow us to be positive. Enormous amount of crude oil is available – so all I can say is: this year, 4-6 dollars a barrel fluctuations are the maximum. There is a big resistance for any movements, be it upwards or downwards. I think, and this is what I tell my clients, that for a good while, both Brent and WTI will remain at an average of 37 dollars a barrel and the 4-6 dollar fluctuations during the year will happen according to this.
Of course, consumers are welcoming this, and those producers too, who earn a lot by the 44-46 dollar price on the futures market.

What about gold?
Last year was terrible for gold. This year, however, will be certainly better, I think. In early December – as I said in my commentary on CNBC – I started deploying serious gold positions, and I still do so. I can only affirm what I said back then: the four and a half years of ‘bear market’ of gold has ended, and the ‘year of the bull’ will commence very soon; if the price of this noble metal will reach 1080 dollars an ounce, then the way is open upwards. And we reached this limit on Monday…
Anyway, I recommend gold especially for Europeans because I am quite certain that its exchange rate will rise along with the dollar becoming stronger against the euro.

Fed should significantly increase basic interest rate for this…
I think that based on the current data, neither inflation nor the growth will get a big boost in America. Therefore, Fed may increase interest rate twice or maybe only once this year. Fed will rather focus on avoiding recession in America. However, I can see a realistic chance for another recession…

Are there any geopolitical reasons for your pessimism about Europe?
Yes; geopolitics ‘takes everything’ on capital markets this year. More precisely: factors such as the developments of the war against ISIS, the result of the American and European elections all influence the behaviour of major market operators. Personally, I – and probably other investors and portfolio managers too – am worried about Russia increasing its naval activity, and China’s intention to expand on the South China Sea. The renaissance of far right and left movements in Europe, and the moderate centre powers losing ground are also worrisome. To a serious investor, the possibility that between two opposing Asian nuclear powers a war may break out – even by mere accidents, like a false order – too causes ‘sleepless nights’.

Original date of Hungarian publication: January 5, 2016