There may be a reason for gold bugs to be worried, according to Fast trader Brian Kelly.
Gold dropped almost 3 percent Wednesday as the stock market rally prompted investors to cash in gains after the precious metal’s surge to record highs in the previous session.
But what really concerns Kelly is what he sees in the chart on the left. He thinks gold is making a double top, and that’s a bearish technical sign.
In case your not familiar with this important technical pattern, according to Investopedia, a double top is a term that describes "the rise of a stock, a drop, another rise to the same level as the original rise, and finally another drop."
Looking at action in the options pit, OptionMonster’s Jon Najarian said he’s seeing traders placing similar types of bearish bets like they did with silver earlier in the week.
“There were aggressive sellers of calls, buyers of puts in the silver ETF ," he said. "Today there is a lot more of that kind of activity in the gold ETF contract as well.”