China has pushed the credit default cost lower by using its monetary policy tool and this triggered the risk-on trade on a global equity platform but the PBOC itself is buying gold. Should you be doing the same?
The precious metal, gold, touched its lowest level for 2019 yesterday, extending its losses for the year all the way down to $1,266. The primary reason for this is the strong rally in the global equity markets. The S&P 500 and the Nasdaq index climbed to a record level on Tuesday. Both indices are up 16% and 22% YTD respectively, while the yellow metal is down nearly 0.36 percent YTD.
Nonetheless, China is a major factor here. The bank has assured investors it is not going to deviate from its current sailing path in relation to its monetary policy. Hence, the cost to insure the country's 5-year government bond against default has touched the lowest level in nearly 11 years. This has had a major impact on the sentiment, a positive one.
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