Gold Holds Near $4,000 After China Ends Tax Break for Retailers
Gold hovered around $4,000 an ounce as traders assessed an end to China’s long-standing tax rebate for some retailers that could weigh on demand in one of the world’s largest precious-metals markets.
Bullion for immediate delivery edged higher during US hours after earlier falling as much as 1%. Beijing announced Saturday that it would no longer allow some retailers to offset a value-added tax fully when selling gold they bought from the Shanghai Gold Exchange and Shanghai Futures Exchange. The news sent Chinese gold jewelry stocks tumbling.
Under the new policy, companies producing so-called non-investment gold, such as for jewelry or industrial applications like electronics, can offset only 6% of the VAT, down from 13% previously. Firms that are not members of the exchanges will be subject to the same change when they sell investment products including gold bars.
“The tax changes in gold’s heaviest consumer nation will dent global sentiment,” said Adrian Ash, director of research at BullionVault. But the rebound in London markets on Monday, following weakness during Asian hours, shows that bullish mood remains strong, he added.
The tax change is “likely to see the entire industry raise prices to pass through the cost pressure,” Citigroup Inc. analysts including Tiffany Feng wrote in a note.
Gold’s rally has helped fuel mergers and acquisitions among producers, including Monday’s all-stock deal by Coeur Mining Inc. to buy New Gold Inc. for about $7 billion that will consolidate two midsize North American companies.
Spot gold was little changed at $3,999.23 an ounce as of 11:32 a.m. in New York. Silver, platinum and palladium all slipped.
Source : Bloomberg.com
