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When gold's volatility calms down, prices will rally back to $2,000 - DeCarley's Garner

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(Kitco News) - Gold investors might want to limit their exposure to the precious metal in the near term as volatility continues to dominate the marketplace, according to one market strategist.

"Right now, markets are moving so fast that less is more for us," said Carley Garner, co-founder of the brokerage firm DeCarley Trading.

Commodity markets across the board have been roiled due to Russia's ongoing war in Ukraine. On top of the war, investors are adjusting to shifting monetary policy from the Federal Reserve as inflation rises unabated at multi-decade highs.

The gold market has been no exception to the volatility this month as prices have pushed above $2,000 and recently fell below $1,900 an ounce. According to the CME's Volatility Index (CVOL), gold's volatility is at its highest since November 2020.

"if you look at a daily price bar, it looks pretty calm. But if you look at the intraday swings, it has been wild. People have been getting stopped out and chasing prices. I'm pretty confident that most people got their heads handed to them."

Garner added that adding to the price swings are this month's options expiration and futures expiration. She said she expects the trading environment to calm down next month as traders roll over their futures contracts.

Looking at gold and silver through a more long-term lens, Garner said she is bullish on both precious metals.

Hawkish Fed spooks hedge funds to take some profits in gold, but sentiment remains solidly bullish

"Gold had been trading in a range for a while and its breakout to $2,000 an ounce was impressive," she said. "Although gold has lost some ground, the breakout is still valid and it is still in an uptrend."

Garner added that when market volatility dies down, she could see gold prices push even above the 2020 highs.

"I think we could see gold above $2,100 an ounce this year," she said.

Looking at silver, Garner said she could see the precious metal pushing into the low $30-an-ounce area.

As bullish as Garner is on gold and silver, she said that there is another market she sees even more potential. She added that she is long bond futures as 10-year yields have pushed to their highest level in nearly three years.

"We have seen an impressive selloff in Treasuries and everyone is underweight," she said.

Treasuries have sold off, pushing bond yields higher as investors prepare for the Federal Reserve to raise interest rates potentially seven times this year. Markets are even pricing in two potential 50-basis points moves this year.

Garner said she is not expecting the Fed to tighten monetary policy as aggressively as markets expect.

 "What the Fed says it will do and what they do are two different things," she said. "I think that Fed has found out that if they talk aggressively, the market will do most of their work for them.

Garner said that although interest rates are expected to rise this year, she sees a slow grind higher.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.