Gold Prices Surge Amid Global Tensions as China Implements Rate Cuts -

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Asian markets opened the week with mixed results on Monday as traders reacted to interest rate cuts by the People’s Bank of China, aimed at revitalizing the world’s second-largest economy. Concurrently, gold prices reached a record high, driven by escalating geopolitical tensions.

Despite a record-setting day on Wall Street last Friday, which saw the Dow and S&P 500 soar, Asian markets did not follow suit, as traders prepared for the upcoming earnings season.

The People’s Bank of China announced it had reduced two key interest rates to unprecedented lows in an effort to stimulate consumer spending and meet its annual economic growth target of five percent. This decision followed recent data indicating the economy expanded at its slowest quarterly rate since early 2023, although it was still better than expected.

Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, remarked, “The monetary policy has clearly shifted to a more supportive stance since the press conference on September 24. The real interest rate in China is too high.”

While recent economic data showed unexpected increases in retail sales and industrial output for September, indicating some resilience, it comes after a series of disappointing readings on inflation, investment, and trade.

In response to economic challenges, Beijing has rolled out various measures to stimulate growth, particularly in the property sector. These measures include interest rate reductions, easing home-buying regulations, and pledges to bolster equity markets. However, after an initial stock rally in mainland and Hong Kong markets, some gains have been reversed due to a lack of substantive detail in recent government communications.

Analysts at Moody’s Analytics noted, “Officials are gradually ramping up support to kick-start the economy — but the will-they-won’t-they of announcements has made the process a rollercoaster for markets.”

In regional market movements, Hong Kong’s Hang Seng Index fell over one percent after a more than three percent gain on Friday, while the Shanghai Composite managed a slight uptick. Other markets, including Tokyo, Singapore, Manila, Bangkok, and Mumbai, also saw declines, whereas Sydney, Seoul, Wellington, Taipei, and Jakarta posted gains.

On the global front, gold prices surged to an all-time high of $2,732.82, fueled by rising tensions as Israel considers retaliation against Iran following recent missile attacks. Additionally, reports of a Hezbollah drone explosion near Prime Minister Benjamin Netanyahu’s residence heightened concerns.

Conversely, oil prices remained stable after experiencing an over eight percent decline last week, amid ongoing uncertainty surrounding China’s economy, the world’s largest oil importer.

Key Market Figures (as of 0710 GMT):