Not feeling “golden” this week

This is not a celebratory post but intended to highlight the practice of observing prices and moods when they reach an extreme.

There are times when experience tells you that things are stretched, feeling “dangerous” or perhaps resembling mania, frenzy or euphoria.
(see my recent posts warning of such)

I still wonder what makes people chase assets at “stretched” prices.

Are they trying to “eek” out the last 10% of a move?

Are they oblivious that the “fat part” of the trade has been seen and had?

Do they understand what their risk/reward ratio looks like?

Today’s example is the price action in Gold.

Yesterday (overnight) Gold fells $130 per ounce of ~ 6.3%. It’s trading at $1,915 as I write this. Incidentally, Silver plummeted 17%.

It’s difficult (impossible, even) to pinpoint the timing of such a move, but it should be easier to understand when not to chase something at perpetually higher prices without having a sound reasoning for doing so.

Today, prices of Aussie gold companies are 7% lower and the poor sod who bought Saracen Minerals (SAR:ASX) 2 weeks ago at $6.75 is wearing 20% worth of pain.

Furthermore, these stocks are now trading at the same prices seen 6 weeks ago.

Wasn’t gold hitting new highs only 4 days ago?

August 12, 2020
by Rob Zdravevski
rob@karriasset.com.au