Technician: Gold’s going lower, and here’s how I’m going to cash in

The possibility that the Federal Reserve could raise rates as soon as next month has pushed the dollar higher, hurting commodities and leading some to question whether gold's great 2016 run is over.

"It looks like they're serious this time about raising interest rates," said Todd Gordon of "If that's the case, we're going to continue to see the dollar rally and commodities, specifically gold, sell off."

But Gordon has a bearish trade that takes advantage of the inverse relationship between the dollar and gold.

Thursday on CNBC's "Trading Nation," Gordon started with a look at the relationship between the dollar and gold, using it to establish a level for his trade. By mapping out both the gold ETF (GLD) and the dollar on short-term daily charts, Gordon marked the gold ETF's high at around $123.50 and recent low at $116.

For the trade, Gordon suggests buying the June 119-strike put for $2.21 per share of the GLD, and selling the June 116-strike put for 99 cents, in a structure known as a "bear put spread."

Since he is paying $1.22 per share for the trade (or $122 per contract). Gordon's trade breaks even at $117.88. Meanwhile, maximum profits come at $116, where Gordon will make $1.88 per contract.

Notably, this contract expires two days after the Fed's June policy announcement, and therefore could be well-positioned to benefit from the Fed's next move.

Read MoreGold slides to 3-week low on Fed rate expectations

Correction: This story was revised to correct that Gordon made his comments Thursday.


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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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