It hasn't been the best of days for the gold bug community (of which I am proud to be a member). While we did open 2012 at $1564 -- and thus are up around 4% year-to-date -- the fear still persists, with rumors that the September 5, 2011 high of $1,920 is a top that will not be revisited for some time, if at all. The PDAC show revealed that our own industry was concerned about fundraising for future mining operations. Mainstream journalists like Joe Weisenthal are making fun of us.
All those are contrarian indicators, of course, and the fact that the price is up year to date is especially important; ultimately price is what truly matters. The price of gold being up year-to-date is one good sign, but it is also important to keep an eye on the price of the U.S. dollar. While the U.S. dollar and gold can rally together, most gold bugs (in gold for the long haul) are betting on a transition away from the U.S. dollar and towards some type of new currency and new international monetary agreement. If the dollar is strong and proving itself to be viable, it means gold, and gold stocks GDX, could decline fairly significantly.
The Euro is its own mess, as is widely understood in the investment community at this point, and so I don't find it to be the best to watch to get an idea of true dollar strength. Rather, the Canadian dollar is what I like to watch to see if U.S. dollar strength is real.
