May 26, 2010 – Is it Time to Revisit Buying Gold Against the Euro

Featured Trades: (GOLD/EURO), (GOLD), (EURO)

2) It is Time to Revisit Buying Gold Against the Euro, which I have been dabbling in for the last 15 months (click here for my initial call). This involved buying gold and then going short an equal dollar amount of Euros against it. I don't spend a lot of time looking at Europe, which I view as perennially slow growth, ossified, sclerotic, and lacking America's immigration advantage as a GDP contributor.  But, the widening interest rate spread between the euro and the dollar was so obvious, that even I could see it from San Francisco with my own jaundiced, astigmatic eyes. Since then, the barbaric relic priced in euros soared 41% from ¬720 to ¬1,020. I have to give credit for this trade to Dennis Gartman of The Gartman Letter, who saw the set up months before I did, and therefore deserves, the trademark, the copyright, the patent, all the credit. Kudos to you Dennis, and I'll be sending a check in your name to the University of North Carolina Endowment Fund. How far can we run?  If gold continues happily motoring on to $1,500/ounce by year end, which many are now forecasting, and we get an overshoot with the euro to parity, that takes the gold/euro trade to ¬1,500, or up 55%. That's a big enough bight of the apple for me to go for.