The gold rally is back on and that has one group of stocks surging.
Gold miners have rallied in seven of the last eight trading sessions, pushing the space to a two-year high. But the rally has one former bull switching sides.
Larry McDonald, head of global macro strategy at ACG Analytics, who called gold miners the "best trade in the world " in January, now says a pullback is imminent, as he believes the space is currently overbought.
"If you're long gold miners, you're actually in a rates trade," he said Thursday on CNBC's "Power Lunch." In his view, gold's current climb is entirely linked to the Federal Reserve's easy money policy, which can easily sway gold if any changes occur.
"Gold miners are being driven by Fed policy, and they're driven by the $10.5 trillion that's in zero interest government bonds in the world," McDonald said. "You've had a massive student body move back into the gold miners in a big way, so they're very overbought here."
The charts are also pointing to a pullback, according to Oppenheimer technical analyst Ari Wald.
"The GDX is back in a range that it was in a few years ago, it's between $22 and $28," he said Thursday. "The current price of the GDX is around $26, so you're closer to the upper end of that range. I think for new positions it's unattractive here."
Wald believes that $23.50 is the level on the GDX traders should be looking for, as he predicts that's when the risk and reward levels finally become attractive. Otherwise, Wald cautions that now is not the right time to buy the GDX.
"They are overbought, the message here is to buy them on pullback," he said.
The gold miners reached their highest level in almost two years during intraday trading on Thursday.
In Friday's premarket, the GDX was down slightly at $26.26.