By now, speculators and investors have learned over and over that gold is a very fickle commodity. The daily rationale for why gold rises and falls is sometimes hard to follow. China has been one of the key drivers of gold in recent years, but now there is word that China may be increasingly less important to the gold story.

While the U.S. economy recovers, China’s demand for gold plummeted in the first six months of 2014. This helped to allow gold to fall back under the $1,300 per ounce mark on Thursday, after having been up more than 8% so far in 2014.

The China Gold Association showed that demand for physical gold fell by a sharp 19% to 569.4 metric tonnes in the first half of 2014. Demand in China for gold was down by a whopping 62% for gold bars, and gold coin demand was also down by a sharp 44%.

It should have been a given that demand would be lower in China this year. After all, last year was a record and China and the nation’s consumers are focusing on other internal and external issues rather than gold. Still, this drop in demand is much more than many industry observers might have assumed.

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We would value the China Gold Association data’s impact on gold prices more than we would another strong weekly jobless claims report that was seen on Thursday morning. Still, the employment backdrop in the United States continued to improve and this gives hawkish Federal Reserve presidents ever more ammunition to want to end economic stimulus sooner. It also can ultimately give those same Fed hawks more ammunition for the Federal Reserve to begin raising interest rates sooner than expected.

Before you panic too much about the end of stimulus and the coming rate hikes (they are coming), it is widely believed that the interest rate hike cycle will be muted compared to past interest rate cycles. It also almost certainly will take years for the Federal Reserve to unload close to $4 trillion in Treasury bonds and mortgage-backed-securities.

Gold bugs and gold bears have a long-term fight on their hands. There are many reasons to own gold. There are also just as many reasons not to own gold. So, what happens if the geopolitical risks start to abate? What if you remove China’s demand story for gold even more in the second half of 2014 — or even in 2015? What if the Fed ends stimulus even faster? And what if the Fed begins hiking interest rates faster? If those suppositions all hold up, and all other things remain static, then the driving force of the story for gold bugs may have peaked in the near-term.

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