Gold hits new highs once again, as BRICS look likely to further move away from the Dollar

Europe has followed the lead of Asian markets, with equities taking on an indecisive theme despite a welcome set of rate cuts from the PBOC. 25-basis point rate cuts on both the 1-year and 5-year loan prime rates seek to lower costs for borrowers across the country. While the rate cut on the 1-year product will reduce the cost of borrowing on short-term loans for businesses and consumers, the decision to also reduce the 5-year LPR will look to ease costs for mortgages in a bid to prop up the ailing real estate sector. Coming in the wake of Friday’s surprisingly strong data deluge that saw industrial production, retail sales, and unemployment rate all improve, today’s fresh stimulative effort from the PBoC seeks to further build on the notion that the economy and market have bottomed out. Nonetheless, the PBoC rate cut seemed to split opinion as the gains seen in Shanghai and Shenzhen we offset by a 1.57% decline for the Hang Seng.

The price of gold has found itself at a fresh high once again, with this week looking set to be dominated by talk of a gold backed BRICS currency. Between them, the BRICS nations have been dramatically stockpiling gold over recent years, with Russia and China now holding roughly 16% of global reserves. While efforts to move away from dollar reliance has thus far been questionable, the comments coming from this week’s BRICS summit could yet shine a light on gold as a key asset for these major economies. Coming at a junction where geopolitical tensions meet monetary easing and soaring debt, many traders and investors are turning to gold despite the 32% already achieved this year.

Looking ahead, this week brings fresh data on both the economic and corporate front. The Bank of Canada rate decision looks to maintain the easing theme, with the bank likely to enact an oversized 50-basis points on Wednesday. Meanwhile, Wednesday’s Tesla earnings head up a week that also sees the likes of Coca-Cola, Boeing, T-Mobile, and IBM report.