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How one trader is playing gold after Monday’s drop

Following a quiet session for stocks that saw both interest rates and gold prices slide, here's what Gina Sanchez, CEO of Chantico Global, will be watching for on Tuesday.

1. Eye on Gold

Gold futures tumbled Monday, as the precious metal fell to a one-month low in early morning trade before beating a bit of a comeback.

More generally, Sanchez observed Monday on CNBC's "Trading Nation" that the commodity "has been in a holding pattern all year after selling off at the end of 2016."

While Sanchez said that the metal has been clipped by Federal Reserve interest rate hikes, she believes the market will take the view that the central bank "will probably only hike twice in 2018, and that should support gold at current levels."

However, in the longer term, "gold probably won't hold up against an eventual economic recovery," Sanchez warned.

2. Fading confidence

The key data point Sanchez will be watching Tuesday morning is the consumer confidence number, which is set to be released at 10 a.m. ET by the Conference Board.

The number, which measures consumers' views about the economy, "fell more than expected in May and analysts are expecting a further fall in June," Sanchez observed.

"Consumer expectations peaked in March and have been falling ever since, and that could raise red flags for the SPY, the S&P 500 index ETF, as well as other broad stock market index ETFs," she added.

In other words, if optimism is fading, that could be a bad sign for economic growth and for stocks as well.

3. Oil slide

Crude rose mildly Monday, but the commodity is still sharply down over the past month.

"Oil prices have been sliding since the end of May and have edged closer to the lower end of the $40 to $55 trading range," Sanchez said.

"With supply continuing to remain high and disappointing demand this driving season, oil could continue to trade down to $40 and remain weak all summer until we see real supply cuts or an increase in demand."

Oil's recent low is $42.05; the commodity last dropped below $40 in August.

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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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