China has announced the end of a major tax incentive on gold sales, a move seen as a setback for consumers in one of the world’s largest bullion markets.
Starting November 1, retailers will no longer be allowed to offset value-added tax (VAT) when selling gold purchased from the Shanghai Gold Exchange, whether sold directly or after processing, according to a new legislation issued by the Ministry of Finance.
Impact on Retailers and Consumers
The change is expected to raise gold prices for Chinese consumers, as the removal of the VAT offset will increase the effective cost of gold sold through retail channels.
This policy shift aims to boost government revenue at a time when a weak property market and sluggish economic growth have pressured China’s public finances.
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Global Gold Market Trends
Globally, gold has recently witnessed a buying frenzy among retail investors, helping the metal rally to record highs. However, the surge also pushed the market into overbought territory, leaving it vulnerable to a price correction.
The worst gold rout in over a decade coincided with a reversal of ETF inflows that had been rising since late May. The correction also matched the end of festive demand in India and easing safe-haven demand after a trade truce between the U.S. and China.
Gold Prices Hold Near Record Levels
Despite recent volatility, gold continues to hover near the $4,000-an-ounce milestone, which it breached earlier in October.
Analysts note that key supporting factors remain intact — including strong central bank purchases, U.S. interest rate cuts, and ongoing global uncertainties that sustain investor appetite for the metal’s safety.
Some in the industry expect gold prices to approach $5,000 an ounce within a year, driven by these underlying fundamentals.
Key Takeaway
China’s removal of its gold VAT offset marks a significant policy shift that could raise domestic gold prices and cool retail demand. While the move strengthens government revenue, it adds pressure on one of the world’s largest consumer markets for bullion.
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