If you’re a stock trader fawning over the S&P 500 on a daily basis, you likely concluded Monday was a boring, go-nowhere day. But that’s because traders were distracted by the glitter beckoning to them in the commodities market. Gold surged above the pivotal $1,300 level to a new high for 2017. The newfound strength drove the stock market’s favorite gold proxy — the SPDR Gold Trust (ETF) (NYSEARCA:GLD) — to multimonth highs, too.

Indeed, GLD is looking stronger than at any point this year.

Not surprisingly, silver, its high beta cousin, staged a robust breakout yesterday as well. The iShares Silver Trust (NYSEARCA:SLV) climbed 2.42% on heavy volume. And while we’re mentioning the sympathy movers, we might as well add gold stocks to the list. The Market Vectors Gold Miners ETF (NYSEARCA:GDX) bested the performance of either metal by soaring 3.63% on the day.

Although all three belong atop your watch list for the week ahead, we’ll focus on GLD in today’s commentary on account of its milestone of finally rising back above $1,300.

The Reasons Gold Glitters

Those seeking a cogent narrative for why gold is suddenly en vogue will likely point to two themes.

The first is the eight-month drubbing transpiring in the U.S. dollar, which just fell to a 32-month low. The greenback peaked on the first trading day of 2017 and hasn’t been able to pull out of its tailspin since. There’s nothing that lights a fire under gold quite like a dollar drubbing. Although their relationship fluctuates, the general correlation is negative. One of the best ways to illustrate the teeter-totter like performance is a chart overlay and correlation indicator.

Two periods stand out in the accompanying chart that make the point: the 2014 episode where GLD soured amid a soaring U.S. dollar, and this year where GLD soared as the greenback soured.

The second force aiding gold is admittedly a tenuous one. In fact, I hesitate to even bring it up, but will simply because it could grow into a bigger tailwind.

I’m talking stock weakness. We’ve seen a modest correction arise, particularly in small caps, that is perhaps increasing the appeal of non-correlated assets like gold. With September and October looming, we’re also in a seasonally weak period of the year for equity markets. The reason for my hesitancy is the fickle relationship between GLD and the S&P 500 in recent years. Sometimes stock weakness has delivered gold strength, and other times it hasn’t.

The relationship isn’t set in stone.

GLD Chart

To see what all the hubbub is about, let’s look at a daily chart of the SPDR Gold Trust.

For brevity’s sake, I’ll skip my usual commentary on the weekly time frame. Suffice it to say it’s now bullish following Monday’s breakout. With today’s close of $124.69 we’re now officially at an 11-month high. The short-term and intermediate-trends are toeing the bullish line, but the long-term trend remains neutral.

Given how far gold prices have fallen since 2011, it will take more than a few months of strength to fully right the long-term ship.

Though there are a few minor resistance levels overhead, the $130 zone should be the target for bulls over the coming weeks.

How to Trade GLD

If you’re looking to capitalize on further strength, consider buying October call spreads. Buy the Oct $125/$130 bull call spreads for $1.44. Gold prices are trading higher in the futures market overnight, so GLD is slated to gap higher tomorrow morning. That will raise the price of the call spread, so you will have to pay up if you’re anxious to get in.

The risk will be limited to the initial cost and will be forfeited if the gold ETF sits below $125 at expiration.

As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.