A Gold Relief Rally on the Horizon?

It's time now for our metal spotlight. Gold is recovering from its biggest weekly drop since June as rising debt risks in Europe boost the appeal of the safe haven asset. Carley Garner, DeCarly Trading senior commodity strategist and broker is bearish on gold, but she writes, quote, the stars are aligning for what has generally been a high probability setup for relief rally, and we cannot ignore it. Carley joins us now. Carley, really great to have you. What is the line for you? Which this moves from something technical that makes sense for gold to rally in the short term to something that actually gets you to change your long held bearish view on gold? Right. So as you mentioned, my my view in the big picture is, I believe gold's gonna have another year, maybe two years of failed rallies. That's kind of the pattern after we have a parabolic blow off top as we did earlier this year. That's what happened in 2011. So with that said, though, the seasonality for gold over the next three or four weeks is quite strong. Over the last fifteen years. It's worked about twelve years from late September to late October. Gold has generally moved higher. But that's the most compelling reason I I think is gold is holding a one year uptrend line on a daily chart. $41.50 ish on the December contract is roughly where it comes in. But how it got to that trend line is interesting. When the October futures went into first notice day last week, we had a really big sell off in the first notice. It was gold is down a $170 in a single session, which is, you know, a pretty substantial move. Generally, when you see that type of price action going into first notice day, it's kind of like an exhaustion of the trend. First notice days often lure trend exhaustion moves that are a little bit stunning just like that was. And then the market often recovers after, and so we think that's a a pretty good setup technically and seasonally for gold. And then lastly, it's no secret that crude oil's driving the ship here as crude oil trades. The treasuries follow, and golden treasuries are trading with a 94% correlation. So if crude oil comes off or continues to come off as we expect, we think crude oil is kind of repeating what we saw earlier this year where it bounces... It rejected a trend line on the upside. And if we come back to the bottom of the range, we're talking seventy, seventy two. That's the two hundred day moving average. That's also the bottom of the trading range for oil. If that happens, it just opens the door for a nice relief rally in treasuries as well as gold. And so that's really what we're, putting most of our our thesis on. How much though does some of the correlations between treasuries and gold get complicated by what's happening in Europe? Because, Carley, it does feel like this recent, like, higher in gold has been driven from fears of, are we heading towards another European sovereign debt crisis? If the move in treasuries also coincides with a jump much higher in European yields, does that mean something different happens with gold this time around? Well, obviously, that that can happen. Well, all all we can do is focus on what the data is telling us now. But as you know, correlations change all the time. So for now, we feel pretty confident that gold will follow treasuries higher, and we think treasuries can can bounce here in a relief rally type of fashion simply because oil moves lower. Now there... There's a lot of assumptions there, obviously. We don't have a crystal ball just like anyone else. But I will say, crude oil often tops out in October. And treasuries, if you look over the last twenty years, these substantial bottoms that we've put in in treasuries have occurred in October. So this is kind of a bear killer for treasury markets. And and... You know? So I I feel pretty confident that that's how things are gonna play out. But as you mentioned, anything can happen, and there's a lot of moving pieces here. Carley, you mentioned that, a client... One of the... One of your clients spending something between 1,500 to $2,000 a day in diesel during harvest. That... That's really painful. Are we getting anywhere near a level where we're starting to see demand destruction come through and that in itself helping to ail to fix some of the diesel pressure, some of the shortages and high prices we're seeing? Yeah. You're absolutely right. So that particular client is a a farmer or rancher. He has a pretty big operation, but these prices tend to break things. And I think demand destruction destruction is happening in real time. Even, you know, the International Energy Agency has commented that this is probably the biggest demand destruction event since COVID, and we all know how COVID was. One one thing I can say about the diesel rally is this is the third parabolic rally that we've had over the last twenty five years. Yeah. The first two were in 2008 and 2022, and both of those created economic slowdown, stock market correct... Corrections. I suspect there's a pretty good chance that that repeats itself. So while diesel prices are really high now, I think, the sad reality is those prices are probably going to slow down the economy and, pull energy prices lower. Carley, thank