Carley Garner, Senior Strategist and Broker at Decarley Trading, joins TheStreet to discuss gold prices.
Transcript:
CAROLINE WOODS: Carley, gold prices have come back down to Earth after hitting records, although still very close to those all time highs. What’s your outlook for gold prices this summer?
CARLEY GARNER: Gold is a market that you want to be bullish when nobody else is bullish, when everybody is bullish, which is the sense that I’m getting. I tend to be contrarian. So now I’ve started looking for gold to top out a little early, I will admit that, but I think in the big picture, when you look at the math that goes along with risk assets, assets, gold doesn’t make any sense. And here’s why the spread between gold and treasuries, let’s say the 10 year note or 30 year bond is the widest it’s ever been. And generally what keeps that spread intact is the fact that treasuries pay interest and gold doesn’t. So if you’re somebody that has an extra money you want to put to work in a risk off asset, so something other than stocks or real estate or maybe even commodities really have two primary choices. Gold or treasuries. You can buy treasuries and earn 4% to 5% yield without a whole lot of downside risk because we’re sitting at multi-decade lows in treasuries. But if you buy gold, we’re near an all time high. There’s no risk parachute. There’s no income cushioning your downside risk. So if you’re trying to buy gold here because you think it’s a risk off asset, it might be a surprise to you. Gold is a risk off asset until it isn’t. The last time we had a rally this substantial. Gold was 2011, and it concluded with a 45% haircut that took a decade to recover. So gold is a tricky market. It can. It’s a diversifier and it works well in some environments, but when it doesn’t work, it’s very painful to be a buy a holder of gold.
CAROLINE WOODS: Carley, where do you expect gold to top out, and at what point would you be comfortable getting in if we do see a pullback?
CARLEY GARNER: Well, so I mean, if I was somebody that wanted to buy gold and I will be there again know I was bullish gold for a very long time until I wasn’t. But I probably won’t turn bullish until we get well into the low 2000. I know that sounds impossible. It sounds like that’s a long way away, but we were just there a year ago. And if you look around your quote boards, we’ve seen assets give back an entire year’s worth of gains over and over again. So it’s not as far as it sounds, we could easily see 2,150 to 2000. And that would basically retrace this entire breakout. And to be 100% honest, I think that’s probably in the cards. I don’t know exactly when and where but I think that is what we’ll see in the next couple of years. The gold market is obviously very, very messy. There’s a lot of political issues pushing it around, so I don’t know exactly where the top is. I suspect that 3,500 we saw a month or so ago probably was the top. If not, we might retest it or go a little higher. But we’re in a sell the rallies mode in gold, and so we’ll have to see how things play out. But again, I think there’s just too much competition from treasuries for gold to be a good buy up here.
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