Here’s why it could be time to short gold: Trader

Gold has soared more than 6 percent so far this year on the back of a falling U.S. dollar, but Todd Gordon of TradingAnalysis.com sees trouble brewing in the charts for the metal that could spell a pullback.

"The gold market has rallied up into resistance, and I think offering a nice opportunity to establish shorts," he said Monday on CNBC's "Trading Nation."

On a chart of GLD, the gold-tracking ETF, Gordon points out that while gold has regained about half of its losses prior to the election, GLD does look to be headed lower toward $110, just above its December lows. In other words, GLD could drop about 6 percent over the next month.


What's more, Gordon points out that the dollar-tracking ETF UUP is "showing a very similar chart" to gold, but in the opposite direction. Gold and the dollar usually have an inverse relationship, meaning that a rising dollar has the potential to bode ill for gold. "We've sat here at a little pullback, but it looks like the dollar has found support and is ready to continue higher, which is going to help that gold market push lower," explained Gordon.


Gordon wants to short gold by buying the March GLD 115/110 put spread for $1.02, which means Gordon is risking $102 per options spread.

In order to make money on the trade, Gordon just needs GLD to close below $113.98 on March 17, just over 2 percent from Monday's levels. If GLD closes below $110 on March expiration, Gordon would make $398, and more than quadruple his money on the trade.

GLD fell almost 1 percent on Monday as gold dropped against the strong dollar. As of Monday morning, the yellow metal was on track for its largest single-session loss this month.

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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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