Gartman writes
It is clearly gold, however, that has the world's attention,
and as long standing bulls of gold, we are relieved to see
it finally break out to the upside. Since the "legacy"
central banks of Europe seem unwilling in the past several
weeks to aggressively sell the gold from their reserves
that they can under the soon-to-be-expired Washington
Agreement there has been little pressure to stem the
bullish rush to the upside.
What was the catalyst to take gold up so dramatically
yesterday? Unlike others who wish to "blame" gold's
strength on the Fed for being too accommodative, or upon
a flight to quality, we shall blame it instead upon news that
China is selling its holdings of US Treasury securities and
is moving rather more rapidly than expected to diversify its
reserve positions. Data from the New York Federal
Reserve shows that foreign central banks cut their
holdings of US Treasuries by $48 billion since late July,
with $32 billion having gone away in the past two weeks.
We cannot know for certain if this was the Chinese, but
they've hinted strongly in recent weeks of their wish to
diversify their holdings. Further, China is clearly angry with
the likes of Senators Schumer and Graham, and with the
likes of Pat Buchanan and others who've been pushing for
Washington to become "tougher" with China on trade.
Beijing has said that it may have no choice but to retaliate,
and moving out of US dollar denominated treasuries and
into other "reservable" assets would be a very effective
way to accomplish that task.
We note then that gold has broken out to the upside not
only in US dollar terms, but in EUR terms, and in Aussie
dollar terms, and in terms of the Canadian dollar, and the
British pound sterling... and we could go on, but our point
is made. This is a very real bull market in gold's favour;
weakness is to be bought rather than strength sold.
