As expected, China is back with its news to the markets again raising concerns regarding the trade dispute between the two economies (US and China). The holidays witnessed by the Chinese markets in the last weekend allowed the global markets to divert their focus towards other macro-economic indicators like the interest rates and higher bond yields. This week the market participants need to brace themselves for the news regarding the trade tensions which have the potential to derail the global growth. Moreover, the concerns for growth in the emerging economies would also be a major factor. Any escalation in the trade wars between the US and China would likely to disrupt the broader equity markets, business and consumer sentiments.
The market participants would be looking to deploy their investable capital towards safe-haven assets. Therefore, they might consider gold for making investments. However, it seems like the macro-economic variables have not spared even gold. The prices of gold have been experiencing the impact of the weaker global economy. The strong outlook of the global central bankers for the US economy might prompt the Federal Reserve to hike the interest rates even further after the apex bank has already raised the rates thrice in 2018. This hawkish monetary stance of the Federal Reserve is being witnessed since December 2015. The US economy is being fueled by the lower unemployment rate as well. Last week, the yields on the government bond witnessed a strong momentum on the back of strengthened dollar as well as bullish outlook on the economy. The trade war between the US and China could dent the global economic growth. Also, the American companies having operations in China have already complained that they have been facing the impacts of the Trump administration’s decisions.
Any global tension spooks volatility in the equity markets which prompts the investors to make outflows from the equity markets and rather go for the investments in the safe-haven assets. However, with the impact on the gold prices, the investors are clearly in a dicey position as to what could be done. The global economists are of the view that the Fed would be raising the interest rates in December meeting and thus, the variables which support the investments into gold like volatile equities are being offset by the anticipation of the increased interest rate environment. Now why higher rates impact gold prices? The reason is simple. The rise in the interest rates, in turn, leads to the appreciation of the dollar as well as yields on bonds. This situation pressurizes the gold as the opportunity cost of keeping gold increases.
The US dollar has been appreciating against the major currencies primarily because of the elevated US bond yields. Gold was considered as an asset class on which the global investors can count on during the tough times like economic as well as political uncertainty. However, it seems like this tag has been taken away from it because the investors seems to be making investments towards the US dollar. Earlier, there were expectations on the Fed that it might not consider increasing the rates because of the escalating trade dispute between the US and China. Now that ship has already sailed, and the Fed is bullish on the US economy. They need to check the inflation level and thus they play with the interest rates.
With this, some ASX listed gold stocks were seen to be moving on a downtrend. For instance, Evolution Mining Limited (ASX: EVN) witnessed a fall of 1.5% in its stock price on October 10, 2018, 2:20 PM AEST.
The Income available from dividends remains attractive for many investors.
We take a look at the best yields on the market and assess what they say about a company’s prospect.
One Thing is certain, though, Australia interest rates are still low, making income difficult to come by and keeping the focus for many investors on high yielding stocks. Kalkine’s team of analysts bought you handpicked report for “Top 25 Dividend Stocks For 2018.”
ASX-relevant Special Reports are published year-round to provide a detailed analysis into an investing opportunity or a potential risk to your portfolio.
Click here to get your free report.
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkinemedia.com and associated websites are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.
As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.