China Ends Gold Tax Break: What It Means For Prices And Global Bullion Markets

In a significant shift for the global bullion market, China has abolished a key tax break on gold purchases. Starting November 1, the Ministry of Finance announced that retailers can no longer offset value-added tax (VAT) when selling gold purchased from the Shanghai Gold Exchange, whether sold directly or after processing.

The decision marks the end of a long-standing incentive that helped fuel one of the world’s biggest gold markets. It comes as Beijing seeks to shore up public finances strained by sluggish property sales and slowing economic growth.

Move Likely to Raise Gold Prices for Chinese Buyers
The change is expected to increase gold prices for consumers in China, a nation known for its strong retail demand for bullion. 
This development arrives at a delicate time for gold traders. A global buying frenzy by retail investors had recently propelled gold prices to record highs before triggering a sharp 
correction.

Global Gold Market Sees Mixed Sentiment
Gold’s recent rout, the steepest in more than a decade, was tied to reduced buying through exchange-traded funds (ETFs) and the fading of seasonal demand linked to India’s festive season. A temporary trade truce between the US and China also reduced safe-haven demand.

Despite this, bullion remains near the $4,000-an-ounce mark it breached earlier in October. Many analysts believe the metal’s long-term outlook remains bullish, supported by central bank purchases, US rate cuts, and ongoing global uncertainties.

Industry experts still see prices nearing $5,000 an ounce in about a year.

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(With Inputs From Bloomberg)