Low-risk strategies and gold to the fore when rate cuts arrive

Headline

The Reserve Bank of Australia (RBA) has cut interest rates to a record low of 0.25% in response to the economic fallout from the COVID-19 pandemic.

The central bank said the cut was necessary to support economic growth and employment, and to keep inflation within its target band of 2-3%.

The RBA also announced a number of other measures to support the economy, including a $200 billion lending facility for businesses and a $100 billion quantitative easing program.

Low-risk strategies

In a low interest rate environment, investors are looking for ways to earn a return on their money without taking on too much risk.

Some low-risk strategies include:

• Cash
• Term deposits
• Government bonds
• Money market accounts
• Certificates of deposit (CDs)

Gold to the fore

Gold is often seen as a safe haven asset, and its price tends to rise when interest rates are low.

This is because gold is seen as a store of value, and investors are willing to pay a premium for that.

In addition, low interest rates make it more attractive for investors to hold gold, as they are less likely to earn a return on their money from other investments.

Other strategies

Other strategies that may be suitable for investors in a low interest rate environment include:

• Dividend-paying stocks
• Real estate
• Infrastructure
• Commodities

Conclusion

The RBA's rate cut is likely to have a significant impact on the Australian economy and financial markets.

Investors should consider their own circumstances and risk tolerance before making any investment decisions.