Gold prices face risk of decline

According to Kitco, the gold market may still have room to rise in the coming period. However, the precious metal is "running out of buyers", which means the risk of a price decline is increasing.

Carley Garner, co-founder of brokerage firm DeCarley Trading, has been bullish on gold for some time, but she added that with prices now above $2,600 an ounce, it’s time to look at the other side of the trade.

“I see gold facing some significant resistance, it’s hard to be bullish at these levels,” she said in an interview with Kitco News. Those comments came as gold prices consolidated above $2,650 an ounce.

Gold prices have enjoyed an unprecedented rally this year, hitting record highs in recent weeks as the market prepares for a new easing cycle from the US Federal Reserve (FED).

Garner noted that while lower interest rates, economic uncertainty and geopolitical volatility provide solid support for the precious metal, she questioned how much of these key factors have been priced into the current market action.

“No matter how bullish the fundamentals are, if everyone is buying, eventually the market will run out of buyers. I think the market needs a reset,” she said.

In addition to overbought conditions, Garner said another risk is that any unexpected economic weakness could send stocks tumbling. She pointed out that the S&P 500 is trading in precarious record territory and it would not take long for the market to panic, creating a liquidity trap that could push gold prices lower.

Garner noted that if gold begins to correct, prices could easily fall to $2,300 an ounce. Garner expects prices to fall lower in October, and believes there will be more volatility in November around the U.S. presidential election. She advised investors to start reducing their risk and exposure ahead of the election.