Since the beginning of December, the All Ordinaries gold index has risen 53% and the price of only one of the 23 stocks comprising the index has fallen

Since the beginning of December, the All Ordinaries gold index has risen 53% and the price of only one of the 23 stocks comprising the index has fallen. The median return among the constituent stocks has been 44%. There can be unusually strong equity price leverage around turning points in the trough of a cycle after individual stock prices, in many cases, have fallen so much. However, as the market is still trying to define a bottom, the gains can just as quickly be lost. The longer term chart opposite shows that, despite the most recent price gains, the index still sits within a range of prices which have persisted for nearly two years. Market conditions may support a breakout eventually - and it would be open to investors to position themselves for that to happen - but the most risk conscious approach would be to assume the range is intact for the time being and to reduce individual stock exposures when the index nears the upper end of its trading range.