Traders ought to keep going for the gold, according to one trader.
The gold miners have skyrocketed this year, with the ETF tracking the group (GDX) more than doubling in 2016. And Todd Gordon of TradingAnalysis.com says the gains aren't over yet.
"The gold market, the underlying gold futures and the gold miners continue to hold a strong bid despite the stock market breaking all-time highs," Gordon said Tuesday on CNBC's "Trading Nation."
Stocks and gold tend to move inversely, with safe-haven gold shrinking as stocks rise. But that hasn't happened this time around.
"I think a lot of it has to do with the lack of response in the dollar, and specifically the weakness we're seeing in the U.S. dollar despite a strong jobs report," he added.
A weaker dollar tends to be good for stocks, because as the value of each dollar falls, it should take more of them to buy the same amount of gold. Gordon looks at a daily chart of the dollar-tracking ETF (UUP) to make his point.
"We're not able to take out those summer highs in the dollar," said Gordon. "[This] tells me there's an underlying weakness that might result to the downside, and that would push the gold market higher."
On a chart of the gold miners ETF, Gordon shows that the GDX has stopped short at $30 a few times before — and now that it's broken through, more gains could be ahead.
More specifically, Gordon believes that GDX could move through to $32 if the UUP continues its current trend. To play the GDX for the upside, Gordon buys the 31-strike calls expiring on the first Friday in September, and sells the 32-strike calls of the same expiration, an overall bullish play that has him paying $0.43 per share, or $43 per contract.
That's how much Gordon would be risking with the trade, while he could possibly make $57 should GDX close at or above $32 in the first week of September.
Meanwhile, from a risk mitigation standpoint, "if the GDX were to move below $30.50, I'll take this trade off and protect the premium that we've outlaid in this trade," said Gordon.
The GDX closed at $30.71 on Tuesday.