Dennis Gartman's Unique Gold Investment Strategy (GLD, FXE, FXY, FXB)

I'm always looking for unique ways to invest in
gold, and legendary investor Dennis Gartman recently discussed a way to
build a gold position in other currencies…

What do I mean by other currencies? Well, as Mr.
Gartman says, “If you buy gold, by definition you have gone short of the U.S.
dollar.”

Now, I'm as bearish on the dollar as anyone over
the long term, but just like no bull market goes up in a straight line,
no bear market drops straight through the floor.

And right now, the dollar is absolutely in the
gutter – even relative to other at-least-as-crappy currencies like the
Euro or the Yen.

Here's a one year chart of the dollar index –
which plots the exchange rate of the dollar against a basket of other
(fiat) currencies.

Is the dollar so much worse than the Euro, the
Yen, the British Pound, etc.?

Maybe – but it's due for a bounce. Well, in fact
it's already bounced from May lows.

So, if you “go short the dollar” today, you're
betting that the dollar will fall further against these other currencies,
which for the past month or so pits you against the trend.

So, in order to swim with the tide while investing
in gold, Gartman recommends building a position in other
currencies.

How? Well, here's the recommendation, straight
from the horse's mouth:

“If you bought $100,000
worth of the gold ETF [(NYSE: GLD)], you would sell
$100,000 worth of the euro ETF [(NYSE: FXE)]. And
essentially what you have done is construct gold in euro
terms.

If you bought $75,000 worth of the gold ETF
and sold $25,000 worth of the yen ETF [(NYSE: FXY)],
sold $25,000 worth of the euro ETF, sold $25,000 worth of the sterling
ETF [(NYSE: FXB)], then you've effectively created gold
in all of those other currencies. You've created a gold position not in
U.S. dollars.”

Definitely a unique idea. It puts you in gold, but
scrubs out any position you have in dollars – short or long.

Right now, it doesn't make sense to necessarily go
long dollars – for trillions of obvious reasons. But I wouldn't go short
the dollar right now either. One of my goals as an investor right now is
to try to avoid the dollar altogether. I don't want any exposure.

I don't want to own Treasury bonds or have too
much money sitting in my checking account. I don't want too much access
to dollars at all – and I think that kind of dollar aversion will be a
trend we see more and more of as our creditors wake up to the fact that
the dollar is a poisonous asset.

So while I would still recommend buying physical
gold (I just bought some last month), I'm interested in Gartman's
technique of scrubbing the dollar out of the equation.

If you have any unique ideas on how to invest in
gold, please send them my way at editorial@resourceprospector.com.

Good investing,

Kevin McElroy

Editor

Resource Prospector