How could record gold prices impact China’s economy?

In recent weeks, gold prices have reached all-time highs. Due to its dual function as a store of wealth and a hedge against inflation, the price of gold has a special place in the financial markets.

Although gold has broken several records since the COVID crisis began, the recent surge in price, which peaked in a new high of $2,135.40 per ounce on December 4, appears to be fueled by demand from China despite the country’s extreme economic uncertainty.

Given that the housing market is still searching for a bottom and that economic development will slow in the upcoming years due to inflows of foreign investment and the yuan’s weight, analysts predict that Chinese demand for the safe haven metal will remain strong.

Experts predict that as economic development slows down in the upcoming years and foreign investment withdrawals put pressure on the yuan, Chinese demand for the safe-haven metal will stay strong. Meanwhile, the real estate market is still searching for a bottom.

The increase in Chinese interest in gold is just one more sign of the country’s declining confidence in the prospects for the second-largest economy in the world under President Xi Jinping’s leadership, along with efforts to support its collapsing currency, capital outflows, deepening deflation, and deteriorating sentiment.