Exit Gold Mining Stocks (Fund)
Well, today’s certainly shaping out to be a horrendous day for crude (down $8 to < $107) and gold (down over 4% to $795/oz). I put in a sell order for my gold mining position this morning, but am guessing I’ll get out only at tomorrow’s prices, which means a 6% haircut.
Trade outcome
- Break-even on gold ETF
- Loss of 5% on gold mining stocks (after including 2.25% entry load, 1% exit load)
Lessons learnt
- Entry wasn’t too bad for gold mining (2 days before bottom).
- Instrument chosen was highly inefficient (entry & exit loaded mutual fund) - not that I had much of a choice in terms of what I could trade.
- Exit was tricky & poor, should have quit the gold miners within a week with a small profit - of course, it looks obvious in hindsight.
Bottom-line: This trade doesn’t set up too often (maybe once or twice a year) and has a good risk-reward profile; but unless we have liquid, low-cost instruments, it doesn’t make sense to trade anything but the (MCX/NCDEX) gold futures for such short-term moves.
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