(Wallace Refiners) – The gold market continues to hold critical support above $1,850 an ounce; however, according to one market analyst, it might be only a matter of time before this level gives out, and investors see lower gold prices.
In a telephone interview with Wallace Refiners, Carley Garner, founder of the commodity brokerage firm DeCarley Trading said that there are a lot of mixed technical signals in gold and silver, but ultimately she is bearish the precious metals as too many investors are discounting the U.S. dollar strength.
“I believe that the U.S. dollar is bottoming so any rally in gold and silver should be sold,” she said.
Garner said that the yield differential between the U.S. and other countries will continue to provide support for the U.S. dollar.
“The Federal Reserve is not expecting to raise interest rates anytime soon, but even at their current levels they are still a lot higher than negative yields in Europe,” she said. “I think we’re probably going to see a lot of foreign investment dollars come into the U.S. to buy treasuries and maybe even stocks. That should hold the dollar. Investors are looking for the most bang on their buck, are going to want U.S. treasuries.”
Not only are U.S. bond yields remain attractive compared to the rest of the world, but Garner added that Monday’s news that Pfizer and BioNTech could potentially have a vaccine for the COVID-19 virus means that the U.S. economy could bounce back quicker than some economists are expecting.
“People are ready to get back to life. Everybody wants to do it safely, but people really want to get back out there and live their lives,” she said. “The news of a vaccine is going to be a major boost to confidence and the economy.”
As to how low gold prices could fall, looking at historical charts, Garner said that she could see prices about 25% from current levels. That would put gold back in the $1,500 level range. She added that she sees silver trading around $15 an ounce.
“It’ll take some time to get there, but by some point next year, maybe first quarter, maybe second quarter, I think that’s where we’ll get there,” she said.
Garner said that gold is currently creating the same chart pattern from its 2011 highs. Gold prices consolidated in a $300 range for more than a year before selling off sharply in 2013.
“If you look at gold historically, it has a pattern of really big rallies and then really big selloffs,” she said.
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