Gartman On Chinese Devaluation: 'Have The Currency Wars Now Officially Started?'

In his latest issue of The Gartman Letter, Dennis Gartman discusses the implication of China’s devaluation of the Renminbi and whether or not this is the beginning of a currency war. Gartman also shares his take on the gold, oil and coal markets.

First shot fired?
Gartman addresses concerns that China’s surprising decision to “quasi-float” the Renminbi by expressing his confidence that China is not “lunatic enough” to start a global currency war. “They know that in that event few if any are left as winners and many… indeed most… are left bereft and broken,” he explains.

Gartman sees this move by China as a response to the IMF, which has said that the Renminbi must be more freely floated before it can be considered a full-fledged reservable currency.

Gold
Gartman believes that gold is currently “strong and it shall get stronger” following the move by the Chinese Central Bank. The devaluation will encourage gold buying in China, which will further entice potential gold buyers who have been awaiting signs of life from the market. In addition, Gartman believes the “stage is and has been set for a massive short covering rally.”

Oil & coal
While oil has rallied right along with other commodities following the Chinese devaluation, Gartman has little confidence in the longevity of the move. “The problem for WTI crude is simple: our drillers are becoming better and more efficient by the hour, the day and the month,” he writes.

In coal, on the other hand, Gartman sees major potential for profits for patient investors. He calls coal “almost comically oversold” and believes that coal prices can rise up to 100 percent in a “rather short span of time” when the coal bear market eventually comes to an end.