Trading Nation

Don't buy gold until it reaches this level, Piper Jaffray technician says

Here's when investors should cash in their gold bets

All that glitters is gold this month.

Gold prices have surged 5% in August as the S&P 500 has tumbled 2%. Its rally has pushed the yellow metal above $1,500 to reach the highest level in more than six years.

Don't buy into this rally yet, said Craig Johnson, chief market technician at Piper Jaffray.

"It's starting to get a little bit ahead of itself," Johnson said Thursday on CNBC's "Trading Nation." "I would trade it this way – I'd wait for this stock, take profits here and now, wait for it to pull back to about $130 on the GLD, then I'd be a buyer on that pullback and confirmation of support."

The GLD gold ETF peaked at $142.47 earlier this week. It would need to fall 8% from current levels to reach Johnson's $130 target.

"On the longer-term setup, you can see that there could be measured objective towards about $160 here. Because this is a very meaningful topside break out of a nice consolidation range," Johnson added.

A move to $160 on the GLD ETF implies 13% upside. It last traded above that level in 2013.

Nancy Tengler, chief investment strategist at Tengler Wealth Management, said in mid-July that the gold trade would work as a near-term play. Since that call, the GLD ETF has rallied 5%.

However, she's not ready to buy the long-term bull case.

"If I believe that slowing global growth is going to infect the U.S., that interest rates are going negative, then I buy gold," Tengler said Thursday on "Trading Nation." "If I think, as I do, that things will consolidate — we'll ultimately get a China deal, not great, and equities will begin to rally and outperform — then you sell here, and invest in dividend-paying stocks."

The GLD ETF remains 24% below its all-time peak in September 2011.