After the Sell-off in Gold: Buying Opportunity or Trap? Institutions: Short-term Rebound, Long-term Bearish

Huitong Finance, October 2—— DeCarley Trading co-founder Garner believes that seasonal trends and technical support have created conditions for a short-term rebound in gold, with a tactical target at $4,500 and the best scenario possibly reaching $4,650. However, she emphasizes this is only a rebound and not a trend reversal. She remains bearish in the medium to long term, and if gold prices rise to the $4,500 to $4,600 range, it will provide a better short-selling opportunity.

On Friday (October 2) during the Asian session, spot gold briefly touched a high of $4,180/oz before pulling back to $4,134, currently trading near $4,160/oz, a drop of nearly 0.4%.

Gold investors suffered heavy losses in the latest round of sell-offs, but a market strategist believes October might offer a breather.

DeCarley Trading co-founder Carley Garner stated in an interview that declining prices, technical support, and favorable seasonal trends have created attractive conditions for a short-term rebound in gold.

Seasonal Trends and Technical Support Resonance, Short-term Rebound Conditions in Place

Garner pointed out that gold typically benefits from positive seasonal factors during this time of year. According to her tracked seasonal data, buying gold around September 29 and holding until October 25 has resulted in gains in 12 out of the past 15 years.

Meanwhile, December gold futures managed to hold an important daily trend line during the latest sharp decline.

However, Garner made it clear that she is looking for a rebound, not the start of a new long-term uptrend.

She stated bluntly: "Do I think gold will go to $5,000 or $5,500? No, I don’t think so. But I do think the next 300-400 points could be to the upside."

Tactical Trading Strategy: Sell Put Options to Buy Call Spreads

Given that a standard 100-ounce gold futures contract can be risky for small traders, Garner suggests that those who want direct exposure to gold prices could consider mini gold futures or even one-ounce gold futures near $4,200 to limit overall risk exposure.

Her latest recommendation is that the company's primary tactical trade is an option strategy aimed at taking advantage of a potential rebound.

She added that to reduce risk, traders could consider buying options on mini gold contracts or even one-ounce contracts.

The specific operation of this strategy is: sell a December $3,900 put option and use the premium received to buy a $4,300/$4,450 call spread—buying a $4,300 call option while selling a $4,450 call option.

Garner stated: “We are using market money to buy the call spread.” However, this strategy faces significant downside risk if gold falls well below $3,900; she described the risk below this level as "unlimited."

Support and Target: $4,000 Likely to Hold, Tactical Target at $4,500

Despite the risks, Garner expects the support around $4,000 to hold. She stated that gold holding above the technical trend line, along with recent volatility surrounding the first notice day of the October contract, suggests the market may have at least established a temporary bottom.

On the upside, Garner said that in the best scenario, the gold price could rise towards the 200-day moving average around $4,650, but her more realistic tactical target is near $4,500.

The stability of the US Treasury market may be a catalyst for gold's next move. Garner believes that after years of weakness, US Treasury prices may be close to an "explosive bottom."

Although she admits bond market volatility could become more extreme, she noted that any signs of stabilization in US Treasuries could provide room for a gold rebound. "Once there's any sign of stabilization in US Treasuries, I think gold has a chance to rebound," she said. "The risk is that, in this kind of explosive market move, chaos has no limit."

Still Bearish Medium to Long Term: A Rebound to $4,500–$4,600 Will Provide Shorting Opportunities

Despite the short-term bullish conditions, Garner stresses that she has not abandoned her broader bearish view on gold. In fact, she says a gold rebound to $4,500 or $4,600 would present a more attractive entry point for short positions.

She said: "I'm not bullish at all. If the gold price gets into the $4,500 to $4,600 area, I would prefer to short from there."

Garner's long-term concern stems from the US dollar. She points out that the dollar tested a nearly 20-year trend line earlier this year, a line that has historically triggered significant rebounds. She expects the dollar will eventually break out of its current slow recovery, thereby exerting new pressure on precious metals. She said: "I think that will ultimately be the nail in the coffin for metals—gold and silver."

Medium-term Risks for Copper: Testing 20-year Trend Line, Possible Pullback of 30% to 50%

Garner holds a similarly bearish medium-term view on copper, which is also partly based on the expectation of a stronger US dollar. Although copper has become one of the most favored commodities in AI and electrification trading, Garner says the metal is testing a major long-term technical resistance level, a level that has caused significant pullbacks several times in the past.

She explains that copper is currently testing a roughly 20-year trend line for the fifth time, and previous encounters have all led to sharp pullbacks. While she does not predict a repetition of some of history's most extreme declines, she says a 30% to 50% pullback is possible. Her bearish view on copper also aligns with her broader expectation that the dollar is preparing for a bigger rally.

Garner says the market has largely ignored the dollar in the past, as previous rallies have repeatedly stalled, but she expects this dynamic to change.

She said: "I think the dollar will start to break some things," adding that the financial markets have not fully priced in the potential impact of a stronger dollar.

Summary

Garner's views provide a clear framework for tactical and strategic division: In the short term, seasonal trends, technical support, and October contract volatility together create the conditions for a gold rebound, with the tactical target near $4,500 and the best scenario possibly reaching $4,650. However, she specifically defines this rebound as a "relief rally" rather than a long-term trend reversal.

In the medium to long term, she remains bearish on gold, believing that a rebound to the $4,500 to $4,600 range will offer a better shorting opportunity. The core logic is the US dollar may break a long-term trend line and strengthen. This judgment also applies to copper, which may face a 30% to 50% pullback after testing a 20-year trend line.

For traders, the key question is whether gold's short-term rebound is a tactical opportunity or a trend reversal, and Garner's answer is clearly the former.


(Spot gold daily chart, source: Easy Huitong)

GMT+8 10:49, spot gold quoted at $4,161.73/oz.