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Note from the MD: RBA pauses rate hikes as gold and silver break out

The RBA decided to leave the cash rate target at 3.6% yesterday, as Philip Lowe stated that the full effect of the past year’s substantial interest rate hikes is yet to be felt, and highlighted the importance of assessing the impact on the economy before taking further action. While February’s monthly inflation indicator (which was only started in September last year) showed 6.8%, moderating from the December quarters annual measure of 7.8%, the RBA has left the door open to future hikes if need be.
The RBA decided to leave the cash rate target at 3.6% yesterday, as Philip Lowe stated that the full effect of the past year’s substantial interest rate hikes is yet to be felt, and highlighted the importance of assessing the impact on the economy before taking further action. While February’s monthly inflation indicator (which was only started in September last year) showed 6.8%, moderating from the December quarters annual measure of 7.8%, the RBA has left the door open to future hikes if need be. The ASX 200 is now around 5% away from it’s all time high. Money markets were forecasting a terminal rate of 4.4% as recently as February, but they are now factoring in a mere 22% chance of another rate hike in May. Wall Street ended slightly down, with the S&P 500 -0.58%, Nasdaq -0.52% and the Dow -0.59% as weak economic data rolled in. US job openings in February dropped to their lowest levels in nearly two years, which suggests a cooling labour market, while factory orders fell for a second straight month. As more earnings reports start to roll in, investors will be keeping a keen eye on where companies have been able to reign in spending without sacrificing growth. After reaching a new high in Australian dollar terms just two weeks ago, gold has continued to show strength as it stacked on 2% of gains and managed to hold them. It is now trading around US$2,040/oz, with August futures nearing US$2,060/oz and October futures trading around US$2,070. Silver has also had a serious run, and is up 25% over the past month after breaking US$25/oz. July futures are currently trading at US$25.35/oz. The XJO has extended its recent rally over the last 15 days up over 4.5% and looks to be testing its 50-day moving average. Futures continue to be pushed higher after the aforementioned rate pause by the RBA. The continued rally has seen volatility stay lower with the XJO current IV Rank of 10.  The XJO has found resistance around the 7,364 level, we would look to see the index close above the 50-day MA to continue the rally and test this resistance. If the market does reverse and head lower we expect to see support at the 200-day MA (7,022). Consumer-driven businesses will be looking at tightening their marketing budgets considering that in 2021 roughly $200 billion was wasted on ineffective marketing briefs and strategies. With AI taking centre stage in 2023, use of the burgeoning tech is becoming a viable option after it was recently revealed that 52% of marketing executives are concerned about the economy in the coming year. We have an investment open with a growing AI-led martech business. It’s via exposure to a wholesale convertible note with a 2-year investment term, a 11% cash coupon with the option to convert or redeem. The business has a solution designed to streamline how brands can reach their consumers with targeted content and measure the results – at a fraction of the time and cost. The business services some of the largest multinational corporations on the planet, including Amazon, Disney, Lego and Nestle. Click here to register your interest.   Past performance is not a reliable indicator of future performance. Reach Markets have been engaged by Tribe to manage this offer and may receive fees for its services.
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