Gold Holds at $4,000, Impact of China's New Tax
Gold prices held steady around $4,000 per ounce after a slight decline earlier in the week, due to changes in China's tax policy. Beijing announced that starting November 1, it would no longer allow some retailers to offset value-added tax (VAT) when selling gold purchased from the Shanghai Gold Exchange and Shanghai Futures Exchange. This new policy has the potential to reduce gold demand in the world's largest market, which has pushed Chinese jewelry stocks sharply lower.
Although gold hit a record high last October due to a surge in retail demand, prices fell sharply afterward. However, gold prices are still up more than 50% this year, driven by demand from central banks and a search for safe haven assets. According to Adrian Ash of BullionVault, the change in China's tax policy will impact global sentiment, although Chinese demand has not significantly contributed to the gold price increase this year.
Shares of Chinese jewelry companies, such as Chow Tai Fook and Chow Sang Sang, slumped more than 8% following the announcement, with Citigroup analysts predicting gold prices could rise further across the industry to offset the additional costs of the new tax. Most retailers in China were previously able to offset VAT when selling gold, but now only exchange members can do so when selling gold as an investment product.
This policy change is effective until the end of 2027 and will limit the tax incentive to SGE and SFE members selling gold as an investment product. For gold sold for non-investment purposes, such as jewelry, retailers can only offset 6% of the VAT value, significantly reduced from the previous 13%. (asd)
Source: Newsmaker.id
