Spot Gold prices came under renewed pressure after China announced the removal of a key value-added tax (VAT) rebate for gold retailers, a move that raises the overall cost of the metal for both investors and consumers, according to ING commodity strategists Ewa Manthey and Warren Patterson.
China ends gold retail tax rebate
The Chinese government has ended the VAT rebate previously granted on gold sold by retailers that was purchased from the Shanghai Gold Exchange. This policy change eliminates a tax offset that had helped reduce gold costs in the domestic market.
The new rule applies to both investment-grade and non-investment gold, effectively making gold purchases more expensive for Chinese buyers. Analysts note that the decision is likely to dampen local demand and could continue to weigh on global spot gold prices in the near term.