The volatility of the gold market has begun to rise, and as gold prices approach historical highs, one trader believes that the risk of a significant pullback is increasing.

Carley Garner, co-founder of DeCarley Trading, a brokerage firm, stated that as gold prices rise to $3000 per ounce, not only does it appear overvalued, but market sentiment has also become extremely optimistic.

She said, "Two years ago, no one wanted to touch gold. But now, everyone has seen too much. Everyone has invested a lot of emotions, and their emotions are very unbalanced

From a technical perspective, Garner stated that the trend of gold prices looks similar to its peak in 2011, when it hit a historical high above $1900 per ounce, and then fell sharply until 2018 when it remained sluggish.

In 2011, we experienced three big waves. Then, after peaking in 2011, there was quite a bit of pain. I think we were probably within that rough range. We saw divergence on the RSI chart, which means that the price rally is creating a new high, but the oscillation indicator is not, which is usually a signal that the rally should be sold rather than bought

She said she shorted gold in mid February, and last week the hardware price closed down 3%. She ultimately took a profit. She added that she currently holds a neutral attitude towards gold.

She said, "If we're right, this is a peak, this is a process. It won't flip over and die, it will be chaos, so I hope to see another rally

At the time of the above statement, the gold price successfully pushed back above $2900 in a safe haven rally, and investors were reacting to the global trade war triggered by Trump's tariffs.

Although gold has attracted safe haven buying as the stock market declines, Garner suggests that investors should proceed with caution. She said the risk is that investors may sell gold to raise cash to offset stock losses and generate capital.

She stated that in an environment of increasing economic uncertainty, she expects US bonds and cash to become safe haven assets for investors to turn to.

She said, "US Treasury Secretary Scott Bessent has stated that they are not concerned about the stock market. What the US government is concerned about is how to lower inflation and interest rates. Unfortunately, getting us into a recession will solve both of these problems at the same time. This will give us a good foundation to reset the economy and bring it back to more traditional fundamentals, rather than simply causing asset inflation due to excessive cash in the system

As for how low the gold price can fall, Garner said that if it falls to $2170 or even $2000, she may start bullish again.

She said, "When the market peaked in 2011, it pulled back 45%. From this perspective, a 45% pullback would be around $1650. I'm not saying that gold prices would reach $1650, I'm just saying we need to understand the potential of gold.