(Kitco News) - Disappointing economic data has pushed gold prices to a four-week high; however, according to one market strategist, April’s all-time high of $3,500 an ounce could be as good as it gets—at least for now.
In an interview with Kitco News, Carley Garner, co-founder of the brokerage firm DeCarley Trading, said that while she is currently neutral on gold, she is looking to sell it at higher prices.
Garner’s comments come as gold has attracted significant bullish momentum, driven by economic uncertainty and geopolitical turmoil fueling safe-haven demand. While gold remains an attractive long-term asset, she said the precious metal has climbed too far too fast.
“I've been through gold cycles, and this does not pass the smell test for me,” she said. “I know there are all kinds of good stories out there as to why gold goes higher, but I've seen this movie before, and I know how it ends. I’m just not convinced that the bigger macro picture isn’t already priced in.”
Garner also extended her contrarian views to the U.S. dollar and Treasuries, as she sees both of these assets as extremely oversold. She noted that speculative positioning in futures and options is at historically bearish levels for the U.S. dollar and long-dated bonds.
“If you look at that chart, you can see that every other time we've gotten close to this level of bearishness, the dollar has done nothing but rally. Ultimately, that will not be good for gold,” she said.
Looking at Treasuries, Garner said that although volatility has picked up in 10-year yields, stability in the U.S. economy still makes bonds attractive as safe-haven assets.
Although yields rose last month after Moody’s cut America’s sovereign debt rating to Aa1 from Aaa due to government spending, Garner said that investors are emotionally overreacting to government debt levels.
“Not from a trading perspective, but in my personal account of long-term assets, I have been loading up on Treasuries, and the coupon payments and interest are more than keeping up with any capital losses,” she said. “If we continue to see higher yields, I expect investors will once again view U.S. Treasuries as attractive safe-haven assets, which will compete with gold.”
Another risk Treasuries pose for gold is that if yields continue to rise, the Federal Reserve could be forced to buy long-dated bonds. Although this environment ultimately supports gold’s long-term bullish uptrend, it does introduce short-term volatility.
Garner added that her bearish position shouldn’t be surprising because gold has traditionally been the contrarian play.
“Everybody said the contrarian play is to be long gold, but at some point, that no longer becomes the contrarian trade,” she said. “Now I’m left asking myself, do I want to be bullish on gold when everyone else is?”
Although she is flat right now, Garner said the trade she is considering involves selling October $4,000 calls and using the premium collected to buy October $3,150/$3,000 puts.
“I actually would like to see gold press up and maybe even retest $3,500,” she said. “I think the odds of gold getting to $4,000 by October are not that great.”
