AUSTRALIAN INTEREST RATES moved lower yesterday as the Reserve Bank reduced its cash rate target by one-quarter of a percentage point to 3.85%.
In its policy statement, the RBA said inflation was within its target band and the risks surrounding inflation had become more balanced.
The Board judged that an easing was appropriate, while noting that international developments were expected to weigh on economic activity.
It nevertheless remained cautious about the outlook and said future decisions would depend on incoming data and its assessment of risks.
For Australian bullion investors, interest-rate decisions are relevant through both investment returns and exchange rates.
Gold does not pay interest, so lower cash returns can alter its relative appeal. However, a rate cut does not guarantee a rise in bullion prices.
The Australian Dollar also influences local gold prices because international bullion is generally quoted in US Dollars. Currency movements can amplify or offset changes in the international price.
The RBA’s decision therefore changes part of the domestic investment backdrop, while global gold prices, exchange rates and product premiums continue to determine the prices Australian buyers encounter.
Disclaimer
This publication is for educational purposes only and does not constitute financial advice. It does not take into account any person’s investment objectives, financial situation or needs. Before making an investment decision, consider whether the information is appropriate to your circumstances and seek advice from a licensed financial adviser where necessary. Past performance is not a reliable indicator of future performance.