Gold has broken through $2,750/oz with a 0.8% gain while Silver has soared 3.1% in a catch-up rally. Precious metals continue to attract new interest as a store of value in uncertain times and also as a counter to the falling value of paper currencies. The current monetary easing trend continued overnight as the Peoples Bank of China announced a 0.25% cut to its benchmark rate to 3.10%, which was more than the 0.20% cut the street had been expecting. Precious metals may also be attracting renewed interest ahead of the BRICS summit which runs from Tuesday to Thursday.
Meanwhile, treasury yields continue to creep upward with the US 10-year yield moving back above 4.10% putting a headwind in front of stocks. US index futures are down 0.1%-0.4%. In Europe today, the Dax is down 0.75%, while the FTSE is down 0.30%.
The Hang Seng lost 1.5% in overnight trading, suggesting that the more aggressive rate cut from the PBOC has reignited concerns about the health of China’s economy on corporate earnings. Commodities, however, seem to be taking the rate cut as a positive for reigniting resource demand as US Crude Oil is up 1.7% today and Copper is up 1.0%.
It’s a quiet day for business news. Earnings season resumes tomorrow with results due from big industrials like GE Aerospace*, 3M*, Danaher, and Lockheed Martin, plus miner Freeport, railroads Norfolk Southern and Canadian National, plus Texas Instruments. The next notable economic event other than anything which may come out of the BRICS summit is the Bank of Canada meeting on Wednesday where a 0.50% interest rate cut is widely expected.
*Shares of GE Aerospace and 3M are held in some portfolios managed by SIA Wealth Management.