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Manic Monday Market Wrap-Up

With the safe-haven U.S. dollar's climb to a two-decade peak having an adverse effect on commodities prices, Australian shares closed at a three-month low on Monday, with miners and energy companies taking the most impact.

The XJO index of stocks in Australia's S&P/ASX 200 market closed down 1.6% on Monday for the third consecutive trading session. This was preceded by a blistering selloff on Friday with the benchmark index dropping 1.9%.

Supported by rising Treasury rates, the pound's fall to a record low, and general risk aversion, the dollar index DXY soared above 114.50 for the first time since 2002.

According to Henry Jennings, senior market analyst at Marcustoday Financial Newsletter, "the big story remains the U.S. dollar and the significant influence its spike is having."

Kalkine CEO Kunal Sawhney added that the negative mood could persist throughout the week, with the benchmark showing volatility and little room for improvement.

Central banks around the world have been rising interest rates to curb inflationary pressures, investors are understandably worried about the possibility of an impending recession.

Miners (.AXMM) were the hardest hit, falling by 5.9%, as the resources sector led the sell-off back home in Australia. With losses between 4.2% and 5.4%, Rio Tinto, BHP Group, and Fortescue Metals all had significant declines.

The strengthening dollar put further downward pressure on oil and gold prices on Monday. Gold major Newcrest fell 5.3% as the gold index (.AXGD) dropped 6.5% to a four-year low. The energy sector (.AXEJ) saw its largest intraday percentage decrease since March 23, 2020, when it fell by over 6.3%. The gold price itself also briefly touched its 52-week low of 1628.70/oz during today’s trading.

What is to happen in the far future is anybody’s guess, but it is quite astute to see that defensive investments such as gold could be seen as inherently undervalued at current market prices.

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