Sentiment Wavers: China Restricts Incentives, Here's the Impact on the Market!
China is removing VAT tax incentives for some gold retailers selling gold purchased through the Shanghai Gold Exchange/Shanghai Futures Exchange, effective November 1, 2025. Essentially, the VAT credit facility at the retail level is being narrowed, leaving only the scheme applicable to exchange members/clients. This policy is in effect until December 31, 2027.
The impact was felt quickly on prices: spot gold fell about 0.6% to around $3,978 per ounce in the early Asian session. At the same time, the Bloomberg Dollar Spot Index remained virtually unchanged, so the primary pressure on gold came from the tax news, not the strengthening dollar. Silver also weakened, while platinum and palladium actually rose slightly.
The simple correlation is this: typically, when the US dollar strengthens, gold is under pressure because it becomes more expensive for non-dollar buyers. But because the dollar tends to be flat, the negative sentiment stems more from the prospect of slowing demand in China—the largest gold consumer market—due to rising retail costs. However, several medium-term supports, such as central bank purchases and interest in hedging assets, are still considered present.
Silver's movements often follow gold's because both are precious metals and sensitive to safe-haven sentiment. Therefore, when tax news pressures gold, silver also weakens in the same session, while other metals can move differently depending on supply factors.
Going forward, the market will be monitoring two things: how much cost increases at the non-member retail level impact domestic demand in China, and whether the dollar's stability will persist. As long as this policy is in place (until the end of 2027).(asd)
Source: Newsmaker.id
