For investors looking to make a long-term play on the space, he recommends buying Barrick Gold.
“The charts, as interpreted by Carley Garner, suggest that the recent rallies in gold and silver are very precarious,” the “Mad Money” host said. “She thinks they could both have one last leg higher, and it might even be substantial, but after that she expects the precious metals to come plummeting back to earth.”
Gold, a safe-haven asset, is up 8% this month, and the commodity is gearing up to close out its fifth-straight positive month for the first time in nearly a decade. The price climbed above $1,974 during the trading day but has since come back down to about $1,950. Meanwhile, the stock market is moving closer to its own hits in February before the S&P 500 collapsed as a novel coronavirus outbreak swept the globe.
Garner, a commodities expert Cramer relies on for chart analysis, concluded that the 32% run in gold futures since mid-March is not only being powered by investors seeking safety in an uncertain market but by a weakening dollar, Cramer explained.
Trillions of dollars in emergency spending from the federal government and money printing programs carried out by the Federal Reserve contributed to a devalued dollar, he said.
Gold and the dollar index typically trade opposite of one another. Both charts traded along a similar trend line between March and May before returning back to normal in June, Cramer noted.
“Garner believes we’ve now reached the point where so many traders have jumped on board this negative correlation bandwagon that it’s pushed both gold and the greenback to overextended and, therefore, precarious levels,” he said. “If the dollar can keep falling, she thinks gold can keep rising, but that has become a mighty big if.”
Garner is co-founder of DeCarley Trading and the author of the book “Higher Probability Commodity Trading.”
Gold prices, Garner thinks, could catch another boost if the dollar were to fall through its floor of support at 93, Cramer said. Should it fall to 88, the boost could be quite significant, he added.
Garner can see the price of gold could rise as high as $2,000, or potentially $2,300 in another scenario, before hitting its peak, Cramer said.
“At the moment, she thinks the former situation is more likely, but if we get one more massive run, you need to understand that it will likely be a quick probe higher that doesn’t last very long,” he said.
“When a gold boom goes bust, it gets really ugly. Once the meltdown starts, Garner thinks we could trade down to $1,525 or $1,450” or “maybe down to $1,300 if we go all the way down to the uptrend support” line.