Gold prices fell below $4,000 per ounce following China’s decision to terminate a longstanding tax rebate for certain retailers, a move anticipated to impact demand in one of the world’s largest precious-metals markets.
Bullion for immediate delivery decreased by up to 1 percent before recovering most of the intraday loss, amid a downturn in Chinese jewellery stocks. The Chinese government announced on Saturday that it would no longer permit some retailers to offset value-added tax when selling gold acquired from the Shanghai Gold Exchange and Shanghai Futures Exchange, regardless of whether the gold is sold directly or after processing.
The precious metal had reached a record high in October, driven by heightened retail buying activity, prior to a significant decline in the last two weeks of the month. Despite the recent pull-back, prices remain over 50 percent higher year-to-date, with many factors sustaining gold’s ascent, including ongoing central bank and safe-haven demand.
“While Chinese gold demand has played little part in this year’s record bull market, the tax changes in gold’s heaviest consumer nation will dent global sentiment,” stated Adrian Ash, director of research at BullionVault. “This news could prove very welcome to traders and investors hoping for a deeper correction after last month’s spike.”
Jewelry stocks were particularly affected; Chow Tai Fook Jewellery Group Ltd saw a decline of as much as 12 percent in Hong Kong, while Chow Sang Sang Holdings International Ltd dropped over 8 percent, and Laopu Gold Co slid more than 9 percent. Analysts from Citigroup Inc, including Tiffany Feng, noted that the tax change is likely to prompt the entire industry to increase prices in an effort to mitigate cost pressures.
Previously, most firms in China had deducted value-added tax on inputs when selling to consumers. Under the new policy, which will remain effective until the end of 2027, the tax incentive is limited to members of the Shanghai Gold Exchange and Shanghai Futures Exchange when selling gold as investment products.
In contrast, both exchange members and non-members intending to produce non-investment gold, such as jewellery or industrial products, can now offset only 6 percent of the input value-added tax when selling to consumers, reduced from the previous 13 percent. This change also applies to companies that are not members but acquire gold directly from the exchange, irrespective of its intended use.
As of 10:31 a.m. in Singapore, spot gold was trading 0.1 percent lower at $3,997.40 per ounce after experiencing a 2.7 percent drop the previous week. The Bloomberg Dollar Spot Index remained mostly unchanged.
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Published on November 3, 2025.
