Trader who called the gold breakdown now sees this

Suddenly, gold is shining.

The precious metal has rallied more than 9 percent from its July low as Fed uncertainty has investors flocking to the safe-haven asset. The move is prompting one trader, who correctly called the gold selloff a few months ago, to now change his tune.

"I think the Fed could be on hold and the gold market could benefit from that substantially," Todd Gordon said Tuesday on CNBC's "Trading Nation."

Read MoreFed's Tarullo: Rate hike likely tough this year

According to Gordon, recent weakness in the U.S. dollar is just what gold needs to break out. "It looks like the dollar is heading back toward its September low," said the founder of and CNBC contributor. "All we need is confirmation from the dollar that it wants to break down and I think gold could get a push to the upside."

Looking at a chart of the GLD, the ETF that tracks gold, Gordon noted that it has recently broken through downtrend resistance. For him, this is positive confirmation that the ETF could surpass its next barrier, the 200-day moving average, which comes in around $114. "If we see a break above $114, we should go up to [the next level of resistance] which comes in at $120." That's a potential 7 percent move from the current trading price around $111.85.

Read MoreThe gold rally is 'doomed to fail': Strategist

To play for a continued rally in the gold market, Gordon bought a call spread. This is a bullish options strategy where a trader will buy a call and then sell a higher strike call to offset the cost. The goal is for the stock or ETF to rise to the strike that you are short.

Gordon purchased the November 112/114 call spread for 75 cents. "I'm targeting that first area of resistance at $114," he said. A move to $114 in the GLD would put the ETF at its highest level since mid-June and put the commodity on track to close its first positive year since 2012.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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