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STEVE CHIOTAKIS: We’re asking the big question this morning, and it centers around gold — which set a record high at just under $1,328 an ounce overnight. But the thrust of what we’re talking about isn’t just what the precious metal is trading at. It’s about what its high price is telling us — about currencies and trade. Dennis Gartman is an expert in commodities and publisher of the Gartman Letter. He’s with us live from Norfolk, Va. Good morning, sir.
DENNIS GARTMAN: Good morning.
CHIOTAKIS: Why is gold so sky high right now?
GARTMAN: Well the easy thing is to say that their buyers are of a more aggressive nature than the sellers, but the reality is gold’s going up because of uncertainties over trade. Gold’s going up because of uncertainties over government action. Gold’s going up because of the fact that gold has become the third reservable currency in the world. People have lost interest or confidence in the U.S. dollar. They’ve lost confidence in the euro. They’ve lost confidence in the British pound sterling. They’re losing confidence in almost every currency as one nation after another attempts to beggar its trade neighbors by devaluing its own currency, so money is flowing to where it feels reasonably safe and for the time being that’s gold.
CHIOTAKIS: Devaluing currency. All right. So we have the Bank of Japan overnight knocking its currency down to near zero and that country is trying to weaken the yen to make Japanese exports less expensive. I mean, we’ve seen the same thing with China. Is this a currency tactic that works?
GARTMAN: Well actually history shows that when you devalue your currency, any gains you make in trade are relatively ephemeral in nature. And think about the signal that you’re sending to potential buyers of your goods — that if you’re going to devalue your currency this week, will you devalue it next week, will you devalue it next month, will you devalue it a year from now.
CHIOTAKIS: Yeah. When does it stop? Are we headed for a trade war, Dennis, quickly?
GARTMAN: I’m fearful that we are. That seems to be the tenor of the times. Perhaps it’s nothing more than a run-up to the elections. But we do have people — both Republicans and Democrats — waving the flags of trade protection and that I find worrisome and I think the capital markets find that worrisome.
CHIOTAKIS: All right. Dennis Garmtan, publisher of The Gartman Letter, thank you sir.
GARTMAN: Thank you.
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