Although the Q1 should give the low in precious metals, one strategist says that investors should not chase the market at the current numbers.
During an interview, Carley Garner, who is the co-founder of the brokerage firm DeCarley Trading, stated that she was bullish on the yellow metal since March and is now expecting the price to be much higher at year’s end.
However, she also said there is a risk that the precious metal might see another washout before it’s ready to go even higher.
“There is some pretty big resistance near $1,850. So, if you are attempting to purchase nearly $1830, it is somewhat dangerous,” she said. “You want to ensure you have hedges in place.”
Garner added that she enjoys the idea of getting in on dips and revealed there is the potential for gold to retest support right below $1,800 per ounce.
The gold market is not only getting strong support during a low interest rate climate, but Garner says the precious metal is also going into a positive season.
“Late summer, early fall is normally a great time for silver and gold,” she said.
Looking at gold’s numbers, Garner says that she does not expect inflation to give much more support, stressing the drop in commodity prices such as the one in lumber. With lumber giving back its gains after having a historic rally during the first part of this year. Garner said that she sees comparable patterns among a broad group of commodities from copper to hog futures.
However, Garner also said that weak commodities cause the issue of deflation or maybe even stagflation instead of inflation. It is not likely that the Fed will move fast to tighten its policy in this climate, she said.
She further expects the deflation danger to show itself later on this year as she believes oil prices will lower to $50 a barrel. She explained that United States shale producers have been reluctant to raise oil production; however, with oil being higher than $70 per barrel, crude oil supply is rising.
Looking at the price of gold, Garner says that if the price can get to $1,900 per ounce by summer’s end, then she would anticipate the yellow metal to get back to $2,000 per ounce by year-end.
Author: Scott Dowdy