• Navigate This Market Turbulence: All Hedgeye Research → 3 Months 66% Off

    Preserve. Protect. Grow. Former hedge fund manager and CEO Keith McCullough has successfully navigated the Dot Com Bust, Great Financial Crisis and Crash of 2020. Get 66% off the smartest investing insights money can buy.

Research Edge Position: We are currently long of gold via the etf GLD

Keith and I have been readers of Dennis Gartman's (aka Garty) in the past and have enjoyed his ability to uncover interesting data points, even if his timing is sometimes suspect.  This morning, though, we are drawing the line in the sand, while Garty may be short of gold, we are long of the glittery metal. 

 A client inquired to us this morning as to our view of gold and referenced that Gartman was negative due to a negative technical position for gold versus its 50-day moving average.  We have serious questions about the predictive ability of simple moving averages like the 50 and 200-day, but do enjoy finding opportunities that arise when investors arbitrarily anchor to them.  When it comes to gold, we currently see both a compelling quantitative set up combined with a supportive demand back drop.

In the chart that is attached, we have outlined our key levels on gold. Our TRADE level is $894, our TREND breakout level is $912, and our TRADE sell level is $941.  Currently, we believe gold is positive from a TREND perspective, which means we like it for 3-months or more. We had previously made a short call on gold in February, which coincided with the peak of the end of the world trade on gold and was highlighted by Greenlight Capital's David Einhorn emphasizing it as one of his larger holdings.  Obviously the facts have changed since then, most particularly the price of gold, but also a number of fundamental factors.

Some key recent fundamental demand data points include:

  • Based on the most recent reports from the Xinhua News Agency, China now owns 1,054 metric tons of gold, which is the fifth largest reserves of any country. (Italy is first based on most recent reports of 2,451 tons.) In addition, April retail sales from China were reported last night and sales for silver, gold, and jewelry were up 10.4% y-o-y.
  • Indian importers bought 30 metric tons of gold in April, which is a 25% y-o-y increase and was driven by the Akshay festival and domestic fears of inflation.
  • In terms of domestic demand, a great proxy is the amount of gold held in the SPDR Gold Shares, which we are long and trades under the ticker GLD. On January 2nd, this etf held 25,085,095 ounces of gold and currently holds 35,497,611 ounces, which is a 41% increase YTD.

We will continue to evaluate real time data points, but the combination of real demand, a great quantitative set up, and increasing threats of inflation make us bullish of gold, at least until the facts change.

Daryl G. Jones
Managing Director

Taking The Other Side Of Garty: We Are Long Of Gold - gold