China Abolishes Gold Tax Incentive Raising Consumer Costs, Impacting Global Market

China has abolished a long-standing tax benefit allowing retailers to deduct value-added tax (VAT) on gold purchases through the Shanghai Gold Exchange, effective November 1. This policy change applies to all gold products, including investment-grade bullion and jewelry, and is expected to increase prices for consumers while reducing retailers' profit margins. The move aims to boost government revenue amid slowing economic growth and a weak property market but may soften gold demand in the short term, particularly among younger and price-sensitive buyers. Despite a recent correction following a global buying frenzy, gold prices remain elevated near $4,000 an ounce, supported by central bank purchases, anticipated US interest rate cuts, and ongoing global uncertainties. Industry analysts view this as one of the most significant fiscal shifts in China's precious metals policy in decades, with potential long-term impacts on both domestic and global bullion markets. While the government benefits from increased fiscal income, the higher costs could dampen one of China's resilient consumer sectors, traditionally seen as a safe haven asset and cultural investment.