ASX closes 0.50% higher, gold gains and bonds fall on market uncertainty while rain is set to return on east coast

“Another escalation around Ukraine will drive significant safe-haven flows to gold, even inflation hedge moves if we see sanctions that trigger another commodity surge,” OANDA senior market analyst Craig Erlam said in a Reuters report.

Proactive Published 23/03/2022

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The ASX has continued its contrary pattern in recent days, rising only 0.50% by day's end despite 10 of 11 sectors finishing higher.

Information technology led a mostly flat market up 3.47%, with the materials sector being the only one to fall, down 0.39%.

Consumer discretionary corrected some of its recent losses, rising 0.63% despite continued impacts of inflation and supply shortages on the automobile and retail sectors.

Gold safe haven as bonds bottom out

Gold prices spiked at the beginning of 2020, fuelled by COVID uncertainty in the global market.

Russia’s invasion of Ukraine has sent the gold price rocketing back to those levels after the largest weekly drop since June 2021, once again responding to geopolitical uncertainty, continuing supply constraints and mercurial oil pricing.

Source: Gold Price

Gold has been an investment safe-haven for as long as the market has existed – and probably far earlier, given our deep fascination with the metal – so it’s no surprise investors are turning to gold as a place to park value in a volatile market.

“Another escalation around Ukraine will drive significant safe haven flows to gold, even inflation hedge moves if we see sanctions that trigger another commodity surge,” OANDA senior market analyst Craig Erlam said in a Reuters report.

Rising interest rates have sent another investment haven, bonds, into a slow descent as we enter the first ‘bad bond’ market in 30 years.

Government bonds have generally been a secure but unexciting part of an investment portfolio, but investors are jumping ship in droves as yield rates fall drastically.

The US bond market is suffering the worst month since Donald Trump was elected in 2016, while the Australian Bond Index has been on a general downward trajectory since August last year and has shed 5.73 points or 3.65% since February 24, when Russia first invaded.

Investors have been enjoying a bullish market since the recovery from the global financial crisis and for many new retail investors this will be their first experience with a market downturn and inflation hike.

As always with the market, historical gains do not guarantee future profit, a lesson many of us will be learning for the first time.

Front brings up to 200mm to east coast

Nostalgic for a time before rain bombs, the east coast of Australia is expecting another week of rain and storms, with the Bureau of Meteorology predicting areas of the New South Wales coast could see up to 100 millimetres (mm) of rain.

NSW will cop the wettest weather, but storms have also been forecast for Victoria, Tasmania and Queensland.

The last set of flooding rains crippled Sydney just as it was coming out of a pseudo, self-imposed lockdown over the Christmas break, shutting down train lines and causing widespread supply chain delays as roads and bridges across the state were closed.

While 100mm of rain usually wouldn’t be cause for concern, dams and rivers are still full from La Nina’s constant barrage of rain over the last two years, and soil is so waterlogged that excess rain has nowhere to go but into our cities and towns.

"We're expecting over the next seven days 50 to 100mm but isolated places could see 200mm fall from tomorrow and into the weekend," senior meteorologist Jonathan How said.

"Sydney is currently experiencing its fourth wettest March on record. This upcoming rainfall could push it into the top three."

Flood damage occupies the highest portion of economic damages from extreme weather in Australia over the last decade, even after the devastating 2019 bushfires ravaged the country.

More infrastructure and relief planning may be necessary, as climate scientists on the Intergovernmental Panel on Climate Change (IPCC) predict these catastrophic flooding events will become more common and even more severe.

“The latest IPCC report makes one thing crystal clear – adaptation policy, finance and practice have to be stepped up urgently if our systems are to keep pace with climate change,” Professor Mark Howden, director of the ANU Institute for Climate, Energy and Disaster Solutions and vice-chair of the IPCC working group behind the report said.

“Simply put, adaptation is key to maintaining our health, our industries and our environment.”