What China's economy has to do with record gold prices
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Gold prices have touched new highs in recent weeks.
Why it matters: The price of gold plays a unique role in financial markets as both a hedge against inflation and a store of wealth.
State of play: While gold has set new records on a few occasions since the onset of the COVID crisis, the recent push higher — which culminated in a new record of $2,135.40 per ounce on Dec. 4 — seems to be driven by Chinese demand, amid deep uncertainty about the economy there.
What they're saying: Goldman Sachs analysts note that the price of gold is underpinned by robust demand from emerging markets, telling clients to "expect persistent strong consumer demand from China and India."
Zoom out: Reuters reported that "analysts expect Chinese demand for the safe haven metal to remain high as economic growth grinds lower in coming years and foreign investment outflows weigh on the yuan, while the property market is still looking for a bottom."
💠Thought bubble: The surge of Chinese interest in gold is another manifestation — along with efforts to prop up its sagging currency, outflows of capital, deepening deflation, and weakening sentiment — of slumping confidence about the prospects for the world's second-largest economy under the rule of President Xi Jinping.
