Make Kitco Your Homepage

Now is the time to build a small position in gold even if prices can move lower - DeCarley Trading's Carley Garner

Kitco News

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) - The gold market remains stuck in neutral, solidly above $1,750 an ounce as it waits for a new catalyst; however, one market strategist says instead of trying to time the market, investors should recognize that current prices represent long-term value.

In an interview with Kitco News, Garley Garner, co-founder of the brokerage firm DeCarley Trading, said that investors could start dipping their toes in the market and building small positions to take advantage of the growing upside potential.

"To be honest, I would love to see gold prices go a little bit lower into the new year to get a better price, but this isn't a bad place to start buying small positions," she said.

She added that in current market conditions, micro-gold contracts are attractive. Mirco futures, trading trade like regular contracts on the CME but is only for 10 ounces of gold, one-tenth the size of a traditional contract.

A 10 cent in a micro contract represents a $1 gain or loss.

"You're not going to get rich, but it's a good way to dip your toe in the market and build a position while limiting your risk," she said.

Another way to gain exposure to the precious metal is through silver. Garner said that the setup in silver looks even more attractive thansilver gold. The comments come as silver prices trade above $21 an ounce. November has been an extraordinary month for silver as prices rallied more than 20% off their October lows.

"We saw silver prices break out of their downtrend in early November and since then, it has come back to hold support," said Garner. "I like the idea of buying dips on silver as long as the price holds above $20.50 an ounce. If it breaks below that level, then all bets are off. That is my line in the sand."

While there is growing potential in the precious metals market, it still lacks a catalyst to spark the next move higher. However, Garner said that she continues to watch the U.S. dollar. She explained that the U.S. dollar index hovers above a crucial technical pivot area at 106 points.

A drop below that level would breathe new life into gold and silver, she said.


Australian gold production drops 9% in Q3, but the sector remains on solid footing

"If we break below 106, then I am looking for the [U.S. dollar Index] to test support at 98," she said. "There was a lot of panic money going into the U.S. dollar this year, and we are starting to see that slow. If we do see that move and I think we will, that unhitches the plow from gold and silver and lets those two run higher."

Many analysts have noted that the U.S. dollar continues to be supported by the Federal Reserve's aggressive rate hikes. Although markets anticipate that the U.S. central bank will slow the pace of its rate hikes, the projected terminal rate remains anchored at above 5%.

Although interest rates can rise from current levels, Garner said that she thinks a lot of this move is already priced into the U.S. dollar. She added that the Federal Reserve will not be able to maintain higher interest rates as it becomes clear the economy has slipped into a recession.

"I actually think we are in a recession, and that is going to be the best thing for gold, especially as inflation remains higher than expected," she said.

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.