China’s economy grew by 1.2% in the fourth quarter of 2025, an improvement from 1.1% in the previous quarter. This growth was better than the expected 1.0%. Year-on-year, China’s GDP increased by 4.5% in Q4, down from 4.8% in Q3, but still above the anticipated 4.4%. In December, Retail Sales rose by 0.9%, below the expected 1.2%. Meanwhile, Industrial Production was 5.2%, exceeding the forecast of 5.0%.

Fixed Asset Investment Decline

In December, Fixed Asset Investment fell by 3.8% year-to-date, worse than the expected 3.0% drop. Following the GDP and activity data, the Australian Dollar slightly rose, with the AUD/USD pair increasing by 0.02% to 0.6686. The Australian Dollar had mixed results against major currencies. The US Dollar gained strength due to positive US labor market data. If future Chinese data exceeds expectations, the Australian Dollar might face resistance near earlier highs, with potential support if losses continue. A rising GDP can lead to inflation and affect interest rates, which, in turn, influences investment choices and currency values. These economic factors can impact commodities like Gold, which often respond to interest rate changes. The better-than-expected Chinese GDP data supports the Australian Dollar, as China is our largest trading partner. However, the market’s mild initial reaction indicates traders are cautious. Ongoing weakness in retail sales and fixed asset investment points to a sluggish Chinese economy, likely limiting any major rally for the AUD.

China’s Industrial Production

The robust industrial production number stands out as it supports demand for Australian commodities like iron ore. Recently, iron ore futures on the Dalian exchange have remained steady above $135 per ton, reflecting this industrial strength. For AUD/USD, selling put options with a strike price close to the 0.6663 support level might be a good strategy to earn premium, as a complete collapse seems unlikely. The ongoing decline in fixed asset investment signals that the property sector crisis from 2025 continues to hinder growth. This challenge makes it hard to see a sustained breakout above the 0.6727 resistance level in the coming weeks. Consequently, we should expect the AUD/USD to trade within a range, balancing positive industrial news against negative investment data. For gold, this stronger Chinese economic data is a bearish sign. A healthier global economy makes safe-haven assets less appealing, leading to downward pressure on prices. This is worsened by a strong US dollar, fueled by expectations of delayed Federal Reserve rate cuts. This scenario puts gold at risk, especially as US 10-year Treasury yields have remained above 4.1% recently, increasing the opportunity cost of holding non-yielding bullion. We should think about buying put options on gold (XAU/USD) to prepare for a possible drop back to last year’s lows. The combination of steady global growth and a robust dollar poses a significant challenge for the precious metal. Create your live VT Markets account and start trading now.

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