Gold extends record-breaking rally, China lowers rates

The People's Bank of China slashed key lending rates, with the 1-year LPR at 3.1% and the 5-year LPR at 3.6%. Meanwhile, gold prices continued their record-breaking rally, driven by rising geopolitical tensions

By Ahmed Azzam | @3zzamous | 21 October 2024

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  • China’s rate cuts aim to stimulate the Chinese economy

  • Geopolitical tensions are driving demand for gold as a safe haven

  • ECB’s Kazimir signals confidence in disinflation trend

China lowers loan prime rates to record lows

The People's Bank of China (PBOC) took further steps to bolster the economy by reducing key lending rates. The 1-year loan prime rate (LPR), a crucial benchmark for corporate and household loans, was lowered by 25 basis points to 3.1%. The 5-year LPR, which primarily influences mortgage rates, was similarly cut by 25 basis points to 3.6%. The move underscores Beijing's continued efforts to stimulate economic activity amid ongoing challenges in the property sector and sluggish consumer demand.

Gold prices extend gains amid rising geopolitical tensions

Gold prices continued their upward trajectory in Asian trading today, extending their record-breaking rally. While uncertainty surrounding the upcoming U.S. presidential election between Democrat Kamala Harris and Republican Donald Trump has been cited by some as a contributing factor, the persistent rally in U.S. equity markets suggests that domestic political dynamics may not be the primary driver. Instead, growing geopolitical risks are increasingly seen as the key factor behind the surge in demand for gold as a safe-haven asset.

ECB’s Kazimir signals confidence in disinflation trend

European Central Bank (ECB) Governing Council member Peter Kazimir expressed growing confidence in the ongoing disinflation trend in the eurozone. In a blog post, Kazimir stated that the path toward lower inflation appears to be on "solid footing." He further indicated that if forthcoming data continues to confirm a steady decline in inflation, the ECB would be in a "strong and comfortable position" to sustain its current easing cycle, potentially paving the way for further stimulus.