Here’s how to cash in when the Fed chickens out: Trader

Speculation about an interest rate hike is making the rounds, but one trader isn't believing the hype — and that has him making a bet on gold.

Todd Gordon of TradingAnalysis.com believes that the Federal Reserve is afraid of market volatility and therefore won't raise rates this month. As a result, Gordon sees gold as the commodity to trade.

Gold prices have an inverse relationship with interest rates. As interest rates rise, non-interest-bearish assets like gold become less attractive in comparison. In addition, a rate hike would send the dollar higher, hurting the value of bullion in dollar terms, as it would take fewer more-valuable dollars to buy the same amount of gold.

Monday on CNBC's "Trading Nation," Gordon looked at a chart of the gold-tracking ETF GLD and pointed out that GLD has been trading in a range all summer, saying that the $124 level is now acting as the ETF's support. From this level, it is set to move higher, in his opinion.

"While we're above the $124 mark here in the GLD, I think it's a buy and we could move out of the range in the gold market," added Gordon.


GLD has surged this year, up more than 24 percent year to date. Meanwhile, all eyes are on the Federal Open Market Committee decision set to be released on Sept. 21. Traders currently see a 21 percent chance of the Fed announcing a hike on that date, according to CME Group's FedWatch tool.

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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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