Gold investors need to know that China has a very strong influence on the trading of the yellow metal commodity.
Why does China's declining economic situation also have a negative effect on gold?
As a giant economy after the United States, China is the largest producer and consumer of gold in the world.
As of 2006, South Africa has been the world's largest producer of gold. But after 2007, the country's production which has been declining has made China the largest producer and monopolized the market for many years.
Although Australia has the highest gold reserves in the world, China has succeeded in surpassing Australia in terms of production.
Therefore, as the largest producer of gold, any bad situation that breaks out in China can invite fear to gold investors by expecting a drop in prices.
This makes China often the main focus for investors whenever the country's important economic data is about to be published.
In addition to being the largest producer, China is also a major consumer of gold where the total demand for gold includes jewellery, investments and reserves held by the central bank.
China's economic policy that wants to reduce dependence on the USD currency also prompts them to increase their gold purchases instead of buying USD.
As is well known, China is one of the countries that is fighting for de-dollarization in the BRICS group of countries.
Demand for the weak USD can depreciate the currency of the American country which is in line with China's wishes.
By increasing the purchase of gold, it will also increase the price of gold in the market.
Because of that, investors are very sensitive to China's actions in relation to gold whether they are buying or selling on a large scale because it can affect the movement of gold prices.
The nature of gold, which is considered a safe-haven, is in high demand when the economic situation in China is in a worrying state.
This is because any uncertainty that hits the world's second largest economy can disrupt the entire global chain, while increasing the demand for gold as a safe deposit asset.
In conclusion, China is one of the main aspects that drives the global gold market that investors need to pay attention to.
