Transcript:

Caroline WoodsJoining me now, Carley Garner, a Senior Strategist And Broker At Decarley Trading. Carley, always good to have you. Thanks so much for joining us.

Carley GarnerThanks for having me. Pleasure to be here. We need to talk about.

Caroline WoodsCommodity.

Carley GarnerMarkets.

Caroline WoodsYes. And I of course have to start with this move higher that we’ve been seeing. And gold coming off a bit today but reach as high as what, $5,500 an ounce. You’ve been calling for a top for quite some time yet. We keep seeing these new highs. Are you still standing your ground or has something technically changed here?

Carley GarnerWell, I think it’s. I think it’s fair enough to say that, even if gold does come, crashing down, like I actually still believe it will. I’m. I’m still been wrong. I did not expect to see what we’re seeing. And there’s a lot of reasons for. I mean, there’s a lot of good, solid reasons for gold and silver to be climbing higher.

You know, three years ago, I was bullish when nobody else was bullish. I obviously turned bearish way too quickly. And there’s a lot of things going on here that, you know, only time will tell how this actually plays out. But there’s a few things that I see that are really, really huge red flags waving for example.

Like when I look at, the options market, I’m seeing really unusual activity. What I mean by that is, but there’s a the CME has this thing called it’s CE vol. It’s kind of like the VIX but for commodities. And you can go on their website. It’s actually free to to access anyone that’s interested. And you can see volatility in the options markets for gold and silver.

And we’re seeing volatility that we really have never seen before with the exception of the financial crisis. So it’s really odd to see what’s going on in gold and silver happening when we don’t appear to be in the greatest financial crisis of our life. Maybe we are maybe gold and silver. Traders know something we don’t, but I don’t think that’s the case.

I think what we’re really seeing is, twofold. First of all, we’re in this environment where speculators kind of go viral, right? Ideas go viral, and they’re legitimate ideas. But when you have everyone in the world piling on to 1 or 2 ideas in commodity markets that aren’t deep enough to absorb that liquidity, you get these really, really crazy market conditions like we’re seeing, one example for would be if, commodity ETFs, there’s commodity ETFs that are or have good intentions.

They’re created to bring retail traders to commodities without forcing retail traders to open futures accounts. And I, I don’t disagree with that. But the problem is when these things become mainstream ideas and everybody’s asking ChatGPT and everybody’s, you know, and they’re on Twitter or wherever you want to call it, all the same ideas. And they all traded by the same commodity.

The market’s not deep enough to absorb that. Everybody thinks gold and silver are very liquid markets because they are they’re big markets, but they’re actually fractured markets. They’re they’re bullion markets. They’re spot markets. You know, with, hundreds of brokers creating their own synthetic markets. The futures markets themselves aren’t that big. Silver has an open interest on the CME of about 100,000 contracts relative to the S&P.

That has up a million or 1 million to 2 million, depending on what you’re looking at. But yeah, the the the idea is the same. These are not big markets, but we have big money coming in and there’s just nowhere for it to go. So you see these kinds of crazy, in my opinion, unsustainable and unjustifiable prices.

But again, I’ll admit I’m wrong. I’m not saying I’m not wrong. I’m saying, there’s some really unusual things going on here, and I don’t know when and where it ends, but I think I know how it ends. We’ve seen this before in commodities. Just in the last couple of years, we saw in cocoa, we’ve seen it in, OFI was one of them.

I’m sorry. I’m running a blank here, but these types of things happen occasionally. You know, a couple of years ago, when crude oil was 130 and natural gas was $10, nobody believed we’d be seeing the prices that we’re seeing today. So just be very careful with this.

Caroline WoodsWhat message do you think gold is sending, though, as it sits at, you know, $5,200 an ounce right now?

Carley GarnerWell, I mean, there’s again, there’s some legit reasoning. I think when people started moving money into gold and silver, it started quietly under the surface. And I think the major catalyst was when Russia invaded Ukraine and the US put sanctions on Russia and froze bank accounts of not only, government holdings, but also citizen holdings of, you know, people that supposedly had ties to Putin.

And I think people in other countries look at that and wonder if maybe it’s a good idea to have all of their cash sitting in U.S. dollar, bank deposits or treasuries. And so I think we got this kind of outflow into them looking for another alternative. If you’re looking for another alternative in regards to sovereign debt or currencies, the reality is there’s really no where else to go.

Most developed countries are paying less interest on their debt than we are. And, it’s arguable to, you know, I’m not going to get into politics, but I don’t think it’s fair to assume that anyone else’s government is any more stable than ours. So I think the solution was gold and silver, and that’s how it started. And I think it just kind of as a story that snowballed into what we’re seeing today.

And we won’t know until we know whether or not that was the best move. I’ll just leave it at one last statement. We saw this kind of wild, rush into an asset in 2020, and guess what that was? It was it was U.S. treasuries in 2020. I recall during the Covid collapse, treasuries spiked wildly. The 30 year bond was trading at silly levels.

The yield was under a percent, I believe maybe a percent at the moment. So people were locking in their cash at roughly 1% for 30 years, and they were perfectly happy doing it because at the time their thought was, there’s no better place to be than, U.S. treasuries. And now we’re getting the exact opposite, environment. But those that rushed into treasuries didn’t turned out not to be doing the right thing at the right time.

And so we have to wonder if maybe this, exodus out of the dollar, out of treasuries into gold is also a similar mistake. But, you know, again, we’ll know when we know.

Caroline WoodsWhat’s the level you think gold should be trading at right now?

Carley GarnerYou know, I’m not someone that thinks gold is worthless. I’m not someone. I’m not a gold bug either. I think a reasonable like when I look at a monthly chart, we’ve seen gold go into corrections for decades at a time. Most of those corrections are between 30 and 50%. So, I mean, you could probably assume, somewhere around 2000 to 3000 is doable.

I’m not saying that’s going to happen tomorrow, but we’re talking a year or two down the road. It could very easily be, in that ballpark.

Caroline WoodsOkay. I want to shift gears and ask you about oil, because oil prices hit a four month high earlier today. It’s trading around $65 a barrel right now, it seems like increased tensions between the US and Iran is really driving that. How should investors be looking at that pop? And are there opportunities there?

Carley GarnerYou know, from a fundamental standpoint I’m not necessarily bearish crude oil. But the reality is we’ve been in a bear market, crude oil for multiple years now. Ever since the Russian invasion of Ukraine, oil’s peaked and we’ve been working on lower highs ever since. And so, so thus far this has been a nice short term rally. But we’ve seen this over and over and over over the last three years, and they’ve all been temporary and they’ve all come back down and, either made new lows or at least fell back under, 60, 55 area.

I’ll also say I’m not ready to call a bottom in oil yet. Maybe this is maybe this was it, but I doubt it. This time of year has been wrought with, capitulation sell offs and oil. And I’ve pointed out on, I think, on this show before, any time we’re below $65 a barrel in oil, it’s kind of like a slippery slope where prices get heavier and heavier, and eventually they just give way into capitulation selling.

And I looked over the last 20 years, this is the fourth bear market. The first three ended with oil dropping below 65, hovering for several months, maybe even a year. And then eventually it just kind of gives way and drops to 40. And then eventually it drops below 40 and we get this really big wipe out sell off.

And so, you know, maybe I ran or some story throws that pattern off. But if we follow the same pattern we have the last three bear markets. Oil’s probably going to see some sort of, you know, collapse to I’m just gonna throw this number out there. The trendline collapse would actually put us somewhere between $15 and $20 a barrel.

So I’m not saying we get there, but I’m saying if we repeat the last three bear markets, that’s exactly what would happen. So be very, very careful with oil exposure. You know, it’s a political situation. So things can change fast, but there is still a lot of downside risk, despite what we’ve seen in the last week or two with oil rally.

Caroline WoodsOil at 20, gold as much as 50% off. I mean, it seems like that could be some pretty risky bets. If those things actually do happen, then. So any other commodities you’re watching right now that could be interesting for investors or that might signal more risk?

Carley GarnerWell, you know, I’m focused on the dollar because there are a lot of dollar bears out there. The sentiment is very, very bearish. And I can’t blame them. Look, we sold off last year 10% and then just stuck there and haven’t been able to hold rallies. And it looks pretty dire in the dollar. But you know there and also say there’s a kind of a narrative online that we’re, there’s a 14 year trend line on a monthly chart.

We broke below that yesterday and the day before, and that is true. But I posted a chart to my socials, weekly chart of the dollar. And we’re actually in this really big trading range over the last five years or so. And we’re at right at the bottom of the range. It’s held every other time. So we’re kind of at the cusp.

Maybe everybody’s right and the dollar collapses. And if that’s the case, gold and silver traders you know buying up here, they have the right idea. Stock traders have the right idea because a weaker dollar is bullish for most assets. But everybody’s thinking that. And what if, you know, what if the dollar does hold support on this weekly chart that I’m looking at and it manages to move higher.

That flips a lot of these narratives, completely on the other side. So it’s going to be really interesting. So that’s what I’ve got on my radar to see what the dollar does here in the next few weeks and the rallies. I think we need to really rethink what’s going on in some of the other assets.

Caroline WoodsOkay. And what is that level that we should be keeping an eye on.

Carley GarnerIn the dollar index? It’s, it’s 96. So I’m looking at the dollar index that trades on the Ice futures. And 96 markets are messy. If it gets to 9594 half I would, you know, call all bets off. But as long as we hold into the mid, in the mid 90s, I think there’s a pretty good chance we rebound.

And again change some narratives.

Caroline WoodsOkay. We’ll leave it there. Carley Garner, Senior Strategist and Broker at Decarley Trading. Thanks so much.

Carley GarnerThank you.