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.


Trades to Watch

Trader Bios


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

Read more