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This could be the ultimate bull trap

Gold bugs are breathing a much-needed sigh of relief.

After closing its longest annual losing streak since the 1990s, bullion has blasted its way to becoming the best performing asset of 2016, rallying more than 9 percent as turmoil in the global markets has investors fleeing for safety.

Interestingly enough, the precious metal saw a similar fate in 2015, where it rallied more than 8 percent into the first week of February. But if you piled into gold during that time, you got tramped the rest of the year, as it fell from a high of $1,300 an ounce in late January to a low just above $1,000 in December.

According to one market watcher, there are two things that must occur this time around in order for investors to escape the bull trap.

On CNBC's "Futures Now" Thursday, ETFtrends.com CEO Tom Lydon said that as long as the Fed stays on hold and the economic picture remains weak, investors will pile into safe haven assets such as gold and Treasurys.

Read MoreGold hits three-month peak as U.S. rate rise views ease

"These assets have gone through the roof," said Lydon. Gold prices are sitting at the highest level since late October, while 10-year Treasurys are near one-year highs.

"We have a trend that is developing here," he said. "As far as gold, there's flows coming in but most importantly we're really coming close to hitting that $1,181 point."

If gold manages to break above the key $1,181 level, Lydon expects the price of the precious metal to continue to rally as high as $1,250 through April. That's a more than 8 percent move from its current level.

He noted that the Treasurys have seen an eyebrow-raising $2 billion come into the market in the last 30 days.

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