China’s economy expanded by 1.2% quarter-on-quarter in the fourth quarter of 2025, improving from the 1.1% growth observed in the previous quarter. This growth surpassed the market’s consensus forecast of 1.0%.
On a yearly scale, China’s GDP grew by 4.5% in Q4, in contrast to 4.8% in the third quarter, and exceeded the expected 4.4%. December Retail Sales rose by 0.9% against an expected increase of 1.2%, while Industrial Production stood at 5.2%, above the 5.0% estimate.
Fixed Asset Investment Decline
Fixed Asset Investment declined by 3.8% year-to-date in December, which was below the anticipated 3.0% decrease. The Australian Dollar slightly appreciated after the release of China’s GDP and activity data, with the AUD/USD pair experiencing a 0.02% rise to 0.6686.
The Australian Dollar showed varied performance against major currencies, with the US Dollar strengthening after positive US labour market data. If future data in China surpass expectations, the Australian Dollar may see resistance near previous highs, with potential support if losses continue.
An increasing GDP can imply inflation and impact interest rates, influencing investment decisions and currency valuations. Such economic conditions can affect commodities like Gold, which typically react to changes in interest rates.
The better-than-expected Chinese GDP data provides a supportive backdrop for the Australian dollar, as China is our largest trading partner. However, the market’s small initial reaction shows traders are cautious. The underlying weakness in retail sales and fixed asset investment suggests the Chinese economy is not firing on all cylinders, which will likely cap any major AUD rally.
China’s Industrial Production
We see the strong industrial production figure as the most relevant detail, as it directly supports demand for Australian commodities like iron ore. Indeed, iron ore futures on the Dalian exchange have recently held firm above $135 per tonne, reflecting this industrial strength. For AUD/USD, this suggests selling put options with a strike price near the 0.6663 support level could be a viable strategy to collect premium, as a complete collapse seems unlikely.
The continued sharp decline in fixed asset investment is a clear signal that the property sector crisis we watched unfold throughout 2025 remains a significant drag on growth. This ongoing issue makes a sustained breakout above the 0.6727 resistance level difficult to imagine in the coming weeks. Therefore, we should be prepared for the AUD/USD to remain within a range, caught between positive industrial news and negative investment data.
For gold, this stronger Chinese economic data is a bearish signal. A healthier global economy reduces the appeal of safe-haven assets, putting downward pressure on prices. This effect is magnified by the strong US dollar, which is being driven by expectations of delayed Federal Reserve rate cuts.
This environment makes gold vulnerable, especially as US 10-year Treasury yields have remained firm above 4.1% in recent weeks, increasing the opportunity cost of holding non-yielding bullion. We should consider buying put options on gold (XAU/USD) to position for a potential retest of the lows seen late last year. The combination of resilient global growth and a strong dollar presents a significant headwind for the precious metal.
