These two charts show that golden times are ahead for the miners: Trader

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.


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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 CNBCand 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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