Buying gold in China is about to become costlier
What's the story
China has announced the end of a major tax break on gold purchases from the Shanghai Gold Exchange. The new rule, effective today, will stop retailers from deducting value-added tax on these transactions. While the government hopes this move will boost revenue, it is likely to make gold more expensive for consumers in one of the world's largest bullion markets.
Price hike
Impact on gold prices
The new rule will affect both investment-grade gold such as high-purity bars and coins, as well as jewelry. The move comes at a time when global demand has already pushed gold prices close to $4,000 per ounce. This is due to central banks stockpiling gold amid ongoing economic uncertainty. Despite a recent dip in prices, experts believe they could reach $5,000 per ounce within a year.
Revenue boost
Potential effects on consumers and government revenue
The end of the gold tax break is also seen as a way for China to boost its government revenue. The country has been struggling with a sluggish property market and weak economic growth, which have put a strain on public finances. However, the new rule is likely to make buying gold more expensive for Chinese consumers, potentially affecting their purchasing decisions in one of the world's top bullion markets.