This Table below shows simply why our local market has overreacted to the short term gold sell down overnight.
As I mentioned in my last posts, our international gold counterparts share price drop have been more measured and in line with that of the gold price. But XGD is now way oversold IMO as it has fallen almost 3 times what AUD gold has done in the last one month.
Bottom line, our ASX market participants, coming out of recent debacle involving a variety of stocks (WTC, ISX, CGC, Banks), are out of depths in determining how they should react , a kind of market inefficiency if you like that is in play. So as we've seen with WAAAX , one day big down then when buying came in, more money start pouring in.
I think in this market environment, its easy to lose money chasing momentum (both ways- buying on momentum up and selling on momentum down) but irrationality pervades the current market. More so, now that news is out that rates may no longer drop as yields are up , so people are starting to wonder what to believe.
This is why more so than ever, buy on conviction stay on conviction. Gold was never going to be a short term, get rich quick scheme and as for all the great growth stocks, they would continue to win as long as their business model holds up and they deliver. When they start failing to deliver, that's when you should have your ears perked up.
