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The Last Time This Happened, Gold Prices Rose More Than 70%By
Tuesday, July 30, 2013
The "ultimate low" in gold was three weeks ago...
That's what Dennis Gartman told CNBC's Squawk Box last Friday.
Gartman knows commodity trading. He's written The Gartman Letter, every day, for 26 years. It's a must-read around the DailyWealth office.
Today, Gartman is buying gold. He plans to keep buying. And I think he's right. Let me explain...
Gartman is bullish for a simple reason... one that longtime DailyWealth readers will understand.
The investing community hates gold right now...
"I bought it for the simple reason that every media outlet, every newspaper article, everything that you listen to was overtly, manifestly, ridiculously bearish," Gartman explained.
In short, no one wants to buy gold. The majority of folks continue to call for lower prices. Based on history, bottoms often form at periods of extreme hatred, like we have today.
We can see this extreme sentiment by looking at the Commitment of Traders (COT) report for gold. The COT report shows the real bets of futures traders. When traders all believe something, the opposite usually happens. Right now, the COT for gold is coming off extreme bearish levels.
Take a look...
 As you can see, the last time futures traders were even close to this bearish was 2008. After traders hit that extreme level of bearishness, gold jumped 71% in 13 months.
This time around, gold prices have already jumped... up over $100 an ounce – or 10% – since their recent bottom in June. That's put the trend in the gold bulls' favor.
"People won't like to hear me say this," Gartman told CNBC, "but the trend is up and it will continue to be up until it stops being up. That's the only thing I've learned in 40 years of doing this in the business. And certainly, I think the lows that were made three weeks ago will stand for a fairly long period of time."
Of course, Gartman is a trader. He isn't making multiyear predictions. But as a trader – with a short-term perspective – he believes the ultimate low in gold occurred in June.
I believe he's right. Gold is coming off extreme levels of bearish sentiment. And it continues to rally.
You can easily trade it with the big gold fund, SPDR Gold Shares (GLD).
It's tough to say how much higher gold could go. But the last time it was this hated, it rose 71% in 13 months. It could happen again.
Good investing,
Brett Eversole
Further Reading:
"I LOVE a HATED investment," Steve Sjuggerud writes. "And today, gold is as hated as it gets." Steve's favorite way to own gold right now is a little-known opportunity... "You could easily see a safe 50% return," he says, "even if gold prices go nowhere." Get all the details here.
"Many traders get a thrill from trying to pick the exact bottom or top of a runaway market," S&A Editor in Chief Brian Hunt says. "They perform the necessary fundamental analysis to realize a market is cheap after a big fall... or expensive after a big rise. Armed with this valuation knowledge, they go for the glory and start buying... and lose a bundle." Learn more in this interview.
Market NotesA BULL MARKET IN MANUFACTURING: A GOOD SIGN FOR AMERICA Manufacturing stocks are rising... and that's good for America.
Regular readers know we keep tabs on the price action in critical sectors of the market – like the airline, financial, transportation, and manufacturing sectors. When these stocks are booming, we know America is doing better than the pessimists would have you believe.
Honeywell (HON) is a "bellwether" of the manufacturing sector. It doesn't have the high profile of GE or 3M, but it is a true giant in the industry. It produces a wide variety of products for the medical, chemical, automotive, construction, and airline sectors. It also employs about 130,000 people worldwide. Nearly half of those jobs are U.S.-based.
As you can see in today's chart, the stock is surging. Last week, shares hit a new all-time high... They're up 31% since the start of the year. GE and 3M are up big as well. U.S. manufacturing is in a major uptrend. And that's good for America.
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