Gold prices hit a historic high and broke a record: Will they continue to rise?

The loose monetary policy implemented by the People's Bank of China to overcome economic stagnation continues to show its effects. China's economic steps, political uncertainty, and the upcoming US elections have enabled gold prices to break a historic record. The price of gold has surpassed 2,670 dollars.

The People's Bank of China (PBoC) announced a series of measures yesterday aimed at stimulating an economy dragged down by persistent weakness in domestic demand and a decline in the real estate sector.

PBoC Governor Pan Gongsheng announced policy steps in a press conference, ranging from a cut in the reverse repo rate to a reduction in reserve requirement ratios and a lowering of mortgage interest rates.

Pan announced that the PBoC had cut the 7-day reverse repo rate, its most important tool for injecting short-term cash into the market, from 1.7 percent to 1.5 percent.

The bank also announced today that it has lowered the one-year medium-term lending facility rate provided to financial institutions from 2.30 percent to 2.00 percent.

Following the PBoC's decision and rising investor expectations that the US Federal Reserve will also support the economy with further interest rate cuts, the ounce price of gold hit a fresh record of 2,670.57 dollars on the London Metal Exchange (LME) today. The ounce price of the precious metal showed a 0.4 percent decline after renewing its record.

While the ounce of gold has gained approximately 30 percent in value this year, analysts are of the opinion that gold demand remains strong due to central bank purchases that have continued since the beginning of the year and conflicts in the Middle East and Ukraine.

Analysts stated that the dollar index, which has retreated to the 100 levels, and falling bond yields are also supporting the upward movement of gold by reducing its alternative cost.