29 Sept 2025
China's housing market and overall economic activity experienced significant declines in August, necessitating further stimulus amidst structural growth challenges. Simultaneously, gold prices continued their record-breaking rally, buoyed by expectations of Federal Reserve rate cuts and various geopolitical factors. High-stakes trade talks between the US and China, alongside an antitrust challenge against NVIDIA in China, introduce additional volatility to global markets, with several central bank meetings slated for the upcoming week.
China experienced a severe fall in housing prices in August, particularly for second-hand homes, indicating the sector's continued need for substantial support despite limited easing of purchase restrictions. The stagnation in the housing market has persisted for over four years, with sales significantly dropping in the second quarter, and the outlook for recovery remains uncertain due to a broader macroeconomic slowdown. This decline, affecting 70 cities and marking a 1.2% month-over-month decrease for the fifth consecutive month, indicates current supportive policies have not yet restored market confidence.
China's economic activity sharply declined in August, suggesting a need for more stimulus packages to boost growth. Industrial production and consumption recorded their worst performance of the current year, with factory and mining output showing only a 2.5% year-over-year increase, the lowest growth since 2024. Retail sales grew by 3.4%, less than the previous month, while investment remained stable but recorded its lowest figure since the start of the pandemic.
China's GDP growth is expected to slow significantly in the third quarter, with the fourth quarter potentially seeing an even deeper fall due to a higher comparison base from 2024, unless new stimulus measures effectively stimulate domestic consumption and demand. Investment declined across various sectors, including pharmaceuticals, machinery, and chemicals, with infrastructure investment limited to 2% and manufacturing investment slowing due to reduced government subsidies for equipment modernization. Consumer goods sales, including home appliances and furniture, also decreased, mirroring declines in housing prices, investment, and sales.
China's current growth decline is identified as structural and persistent, rather than temporary, exacerbating its economic challenges. The observed fall in investment, especially within the housing market, highlights the limited effectiveness of government spending. Production is also under pressure, exemplified by a second consecutive monthly decline in coal production, while the impact of anti-inflation policies has led to increased over-competition and overcapacity since July, affecting key industries like steel and copper.
High-level trade talks between China and the US are ongoing in Madrid, as the 90-day trade truce approaches its November expiration without a definitive resolution. A successful agreement from these negotiations could significantly boost China's overall production growth, offering a potential solution as China currently suffers from weak domestic and external sales. Reduced trade tensions resulting from these talks could also create a downside risk for gold prices.
Gold continues its record-breaking rally, with prices at historical highs, driven by persistent expectations of Federal Reserve rate cuts. Traders anticipate a 25% reduction in interest rates due to signs of a weakening labor market, which has kept gold prices elevated. This anticipation has also led to a decline in US bond yields to recent lows and a weakening of the dollar, further supporting gold's value.
Gold has seen a nearly 40% increase this year, successfully overcoming an inflation-adjusted recession after a period of limited fluctuation. Geopolitical uncertainty, potential shifts in US political policies, and substantial purchases by central banks worldwide are key factors sustaining these high prices. Former President Trump's unprecedented pressure on the Federal Reserve could also further elevate gold prices and maintain its upward trend.
China's regulatory body announced that NVIDIA violated antitrust laws following an investigation, a move that intensifies pressure on Washington amidst ongoing trade negotiations. The State Administration for Market Regulation issued a brief statement without further details, but this news caused NVIDIA's stock to fall in pre-market trading. This development is likely to cause US markets, particularly the Nasdaq index, to open negatively and could also potentially impact Bitcoin.
The week ahead is crucial, featuring four central bank meetings: the Bank of Canada and the Federal Reserve on Wednesday, the Bank of England on Thursday, and the Bank of Japan on Friday. Outcomes from these meetings, alongside developments in US-China negotiations, are expected to significantly influence global markets.
Gold maintains its historical price surge, driven by expectations of Federal Reserve rate cuts, geopolitical uncertainties, and strong central bank demand, solidifying its safe-haven status.
| KeyArea | Insight | Impact |
|---|---|---|
| China Housing Market | Severe price fall in August, especially for second-hand homes, marking 5th consecutive monthly decrease. | Housing sector needs substantial support; recovery outlook uncertain; current policies haven't restored confidence. |
| China Economic Activity | Sharp decline in August; industrial production (2.5% YoY) and retail sales (3.4% growth) hit lowest figures. | Expectation for more stimulus; Q3 GDP growth likely to slow significantly; Q4 faces deeper fall. |
| China Structural Issues | Growth decline is structural, not temporary; limited effect of government spending; production under pressure. | Persistent economic slowdown; increased over-competition and overcapacity in key industries. |
| US-China Trade Talks | High-level discussions ongoing in Madrid; 90-day truce ending without definitive results. | A successful agreement could boost China's production; reduced tensions could pose downside risk for gold. |
| Gold Market Performance | Trading at historical highs ($3640/ounce) after 4 weeks of growth; up nearly 40% this year. | Driven by expectations of Fed rate cuts; supported by weak labor market, lower US bond yields, and weaker dollar. |
| Gold Price Catalysts | Geopolitical uncertainty, Trump's policy impact, massive central bank purchases, and pressure on the Fed. | Maintain upward trend and safe-haven status; potential for further price increases. |
| NVIDIA Antitrust China | China declared NVIDIA violated antitrust laws without providing details. | Increases pressure on Washington for trade talks; NVIDIA stock fell pre-market; likely negative opening for Nasdaq and potential impact on Bitcoin. |
| Upcoming CB Meetings | Four central bank meetings this week: BoC, Fed (Wed), BoE (Thu), BoJ (Fri). | Critical week for global market direction; outcomes will significantly influence market sentiment and financial conditions. |
