Gold 2008 and 2022 All Over Again? Stocks, USDX / Commodities / Gold & Silver 2024
Can the HUGE price move from thoseyears really be repeated?
AnalogousSituations: 2008, 2022, and Now
As gold continues to move back andforth in the same trading range, I decided to dedicate today’s analysis tosomething different. After all, I already described my current goldprice forecast for May 2024 and the situation in the forex marketremains just as I had described it earlier.
I emphasized many times that the currentsituation is analogous to 2008 and 2022 due to several reasons, and one of themis the similarity in world stocks. They reach the same price levels.
In all three marked cases – 2008, 2022,and now – we see similar performance in mining stocks. The latter moved higherin a way that was quite notable on a short-term basis, but not when compared tothe previous medium-term price moves.
I described that the overall implicationsare bearish as ultimately in both: 2008 and 2022 miners declined significantly, but what I would like to do today is to examine those previous years in greaterdetail and consider what was happening also in other markets at that time.
Starting with 2008, we see that stockswere actually first to top, then gold topped along with the USD Index’s bottom– and that was when miners also formed their final high.
The important detail, however, is thatinitially (between Nov. 2007 and Mar. 2008), miners (XAU Index at the bottom ofthe chart) were weak relative to gold, and then they faked strength rightbefore the decline. In late June and early July, miners moved quite close totheir previous high, while gold didn’t, especially in late June. The decline ingold and miners picked up pace when the USD Index rallied decisively and whenstocks declined in a profound way. The latter was particularly important for the miners.
Let’s check how it looked in 2022.
Once again stocks were first to top, thengold and miners topped. The interesting thing this time, was that the USDIndex’s bottom and gold’s top were not aligned. The dollar bottomed first, andgold ignored its rally initially, but only initially. When the USD Index showed that it wasn’t fooling around andthat it meant business, gold plunged.
The U.S. stocks (S&P 500 Index) movedhigher in a more visible manner.
Once again, the really interesting thingwas that after being weak initially (in early March 2022 miners didn’t move tonew high while gold did), miners faked strength right before the big decline.Namely, in early April 2022, miners moved to new short-term highs, while gold didn’t.
The April – June decline was particularlybig in case of miners as both: gold and stocks were declining.
Implications andFuture Forecast
What does the above tell us? Severalthings:
The huge declines in stocks arelikely to translate into huge declines in miners, but before the most volatilepart of the decline happens, the timing doesn’t have to be aligned in the shortrun.Gold price is likely to belinked to the USD Index, but it might initially rally despite USD’s gains, andit’s likely to slide once the USD Index proves that it can continue to rallyfor longer.The final days/weeks before thereally big decline are likely to be characterized by mining stocks’ fakestrength.The U.S. stocks might berallying in the final parts of the rally while world stocks no longer move tonew highs.All right, let’s see how the abovechecks out in the current market environment.
Starting with point 4, we see a reactionthat’s more or less in the middle of what we saw in 2008 and 2022. The U.S.stocks are rallying more than world stocks, and their outperformance isvisible, particularly since the beginning of 2023, but it’s not the case thatthe world stocks stopped at their short-term highs. They stopped at theirlong-term highs, though, suggesting that the situation is indeed rathersimilar.
Point 3 definitely checks out – I markedthe recent “strength” of miners with the orange rectangle, and it’s clear thatminers had underperformed previously as they didn’t even move to their 2023high, while gold moved way above it.
Point 2 appears to be aligned as well.Gold price initially rallied despite USD’s rally and now it’s declining.
Point 1 is something that’s still likelyto play out in the future – it’s not the time to assess it. We’ll know onlyonce both declines happen, which means that it will be too late to react. Thiswill be the time that the ones that had prepared will be wondering what to dowith their huge profits.
All in all, the things that might seemgame-changers (why are miners holding up so well?) or out of tune (are gold anddollar de-coupling here?), are actually yet another rhyme of history thatbecomes clear when one examines the situations that are indeed analogous. Theupcoming price moves are likely to bring superb returns to those who areprepared, and being aware of the long-term cycles and analogies helps in thatprocess.
Naturally, the above is up-to-date at themoment when it was written. When the outlook changes, I’ll provide an update.If you’d like to read it as well as other exclusive gold and silver priceanalyses, I encourage you to sign up for our freegold newsletter.
Thank you.
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Toolsfor Effective Gold & Silver Investments - SunshineProfits.com
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Disclaimer
All essays, research and information found aboverepresent analyses and opinions of Przemyslaw Radomski, CFA and SunshineProfits' associates only. As such, it may prove wrong and be a subject tochange without notice. Opinions and analyses were based on data available toauthors of respective essays at the time of writing. Although the informationprovided above is based on careful research and sources that are believed to beaccurate, Przemyslaw Radomski, CFA and his associates do not guarantee theaccuracy or thoroughness of the data or information reported. The opinionspublished above are neither an offer nor a recommendation to purchase or sell anysecurities. Mr. Radomski is not a Registered Securities Advisor. By readingPrzemyslaw Radomski's, CFA reports you fully agree that he will not be heldresponsible or liable for any decisions you make regarding any informationprovided in these reports. Investing, trading and speculation in any financialmarkets may involve high risk of loss. Przemyslaw Radomski, CFA, SunshineProfits' employees and affiliates as well as members of their families may havea short or long position in any securities, including those mentioned in any ofthe reports or essays, and may make additional purchases and/or sales of thosesecurities without notice.
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