Gold's Path Is Down, Not Up - DeCarley Trading
(Kitco News) - Gold has missed several opportunities to rally this year and the path of least resistance is in the downward direction for now, this according to Carley Garner, president of DeCarley Trading.
“[Gold] has had every excuse in the book to rally. We’ve had political turmoil, trade conflict, and gold just can’t seem to get above $1,350, $1,360 [an ounce]. So, I think we’ve missed the boat on the rally,” Garner told Kitco News.
The yellow metal has traded range-bound since early 2018, testing lows of $1,320 an ounce but failing to break past and stay above $1,360 an ounce, which some analysts consider a key resistance level.
Several key macro events did provide short-term tailwinds for gold in the last month. The latest round of rate hikes from the U.S. Federal Reserve in March sent gold higher. Fears of a trade war between U.S. and China further fueled the rally in early April, causing gold to climb to a 3-month high of $1,353.2 an ounce.
However, gold has since slid 2% since April highs on the back of a strengthening U.S. dollar and fast pace of rising yields. The U.S. 10-year treasury rose above 3% on Tuesday for the first time since January 2014.
Garner noted that the dollar’s strength is likely to persist throughout the year due to rising interest rates, adding further resistance go gold.
She added that gold’s lukewarm performance in the face of falling stocks is reminiscent of February when equities markets sold-off sharply but gold failed to materially rally.
“If you remember back in February of this year, it’s kind of the same story. The S&P was completely collapsing, and gold was creeping higher, but there wasn’t a big substantial move like you would expect in gold,” Garner said. “I just think if they can’t do it now, when are they going to be able to do it? I’d rather be bearish on rallies in this market for the time being.”
Garner said that gold’s tight range is not due money flowing into bitcoin, as some analysts have speculated.
“When I look at the futures volume in bitcoin, it’s really low. We’re not talking a really big market here, it’s actually very thinly traded, so I don’t think that’s a big story there,” she said.