When you take a look at the long term charts again, -- not of the NASDAQ or the tech sector -- but gold mining stocks, gold price and the dollar index, it gives you reasons to worry.
From looking at the price action among the precious metals sector and the dollar, it feels like these markets are very close to repeating what happened in the year 2000.
The chart below is a monthly chart looking all the way back to 1996. See the color-coded areas of the chart that represent weak and strong times for the price of gold.
- The U.S. Dollar is trading roughly at the same level and trending higher as it was in 2000.
- Rising dollar is neutral or negative on commodity prices and resource stocks like gold miners.
- Gold price has struggled as the dollar rose in value.
- Gold stocks fell sharply during the last year of their bear market.
- Gold stocks bottomed before physical gold by several months.
In short, most of the downside damage has already been done to the price of gold. Gold stocks on the other hand could still get roughed up for a few more months before finding a bottom.
Money is likely to continue rolling into the dollar as a safe haven and this will keep gold and silver prices relatively flat. But once the dollar starts to show signs of increased volatility, similar to 2000 and 2001, money will find its way into other currencies and precious metals as the new trade and safe haven.