While the Central Bank of China’s significant loosening of monetary policy to support the economy continues to have an impact on asset prices, the ounce price of gold continues to break records.
The People’s Bank of China (PBoC) yesterday announced a series of measures to revive the economy, which was dragged down by the ongoing weakness in domestic demand and the decline in the real estate sector.
PBoC President Pan Gongshan announced policy steps at the press conference, from reducing the reverse repo rate to reducing required reserve ratios and reducing mortgage rates.
Pan had announced that PBoC had reduced the 7-day reverse repo rate, which is the most important tool for transferring short-term cash to the market, from 1.7 percent to 1.5 percent.
The bank announced today that it has reduced the one-year medium-term loan interest rate given to financial institutions from 2.30 percent to 2.00 percent.
Following the decision of the PBoC and the increasing expectations of investors that the US Federal Reserve will support the economy with further interest rate cuts, the ounce price of gold broke the record at 2 thousand 670.57 dollars on the London Metal Exchange (LME) today. The ounce price of the precious metal decreased by 0.4 percent after breaking a record.
While the ounce of gold has gained approximately 30 percent in value this year, analysts believe that gold demand has remained strong due to the ongoing central bank purchases since the beginning of the year and the conflicts in the Middle East and Ukraine.
Analysts stated that the dollar index, which dropped to 100 levels, and falling bond yields also supported the upward movement of gold by reducing its alternative cost.