Gold price holds $4,000 as market brushes off China policy shift

Ben Graham · Novembro 3

Gold held the $4,000 level on Monday as traders assessed an end to China’s long-standing tax rebate for some retailers, a move that could weigh on demand in one of the world’s largest precious metals markets.

Spot gold traded 0.2% higher at $4,009.58 per ounce by midday New York, after falling as much as 1% earlier. US gold futures also inched higher, up 0.6% to $4,020.80 an ounce.

Gold investors are still digesting Beijing’s announcement on Saturday that it would no longer allow some retailers to offset a value-added tax fully when selling gold they bought from the Shanghai exchanges.

“The tax changes in gold’s heaviest consumer nation will dent global sentiment,” Adrian Ash, director of research at BullionVault, told Bloomberg. 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 analysts including Tiffany Feng wrote in a note.

China cuts gold tax exemption as state bank stops gold product enrolments

TD Securities’ Dan Ghali said the VAT exemptions “may not be immediately relevant for gold prices as Chinese end-user gold demand has remained lackluster for months,” noting that wholesale demand in China has trended 28% below its five-year average over the prior quarter.

Gold prices soared to a record in October, propelled by a retail buying frenzy across major markets like China. However, the metal has since dropped sharply, with gold exchange-traded products recording two consecutive weekly declines in total holdings.

Still, bullion remains up by more than 50% this year, even after the recent pullback. Many of the fundamentals that fueled the rally, including central bank and haven demand, are expected to remain in place, with many industry experts forecasting prices to reach $5,000 within a year.

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