Recently business and financial guru Mark Cuban wrote an article about why
this tech bubble is going to be worse than the tech bubble of 2000. This made
me take another look at the long term charts again, but instead of looking
up the NASDAQ or the tech sector I decided to check out gold mining stocks, gold
price and the Dollar index.
From looking at the price action among the precious metals sector and the
dollar it looks and 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. I have
color coded areas of the chart that represent weak and strong times for the
price of gold.
Key Points:
- The US Dollar is trading roughly at the same level and trending higher
as it was in 2000.
- Rising dollar is neutral/negative on commodity prices and resource stocks
like gold miners.
- Gold price 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.
Concluding Thoughts on Dollar, Miners, & Gold Price:
In short, I feel 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 (top) similar to 2000 - 2001 money will
find its way into other currencies and precious metals as the new trade and
safe haven.
