GOLD held around $4,000 an ounce after a weak start on Monday, as China ended a long-standing tax rebate for some retailers, said Bloomberg News.
The tax change could weigh on demand in one of the world’s largest precious-metals markets, the newswire added.
Bullion for immediate delivery traded little changed towards midday in London, after falling as much as one percent in early trade, it said.
Beijing announced on Saturday it would no longer allow some retailers to offset a value-added tax fully when selling gold bought from the Shanghai Gold Exchange and Shanghai Futures Exchange. The news sent Chinese gold jewellery stocks tumbling.
Under the new policy, companies producing non-investment gold, such as for jewellery or industrial applications, can offset only six percent of the VAT, down from 13% previously. Firms not members of the exchanges will face the same change when selling investment products including gold bars.
Gold surged to a record in October but has since dropped sharply. Prices remain up more than 50% year-to-date.
“The tax changes in gold’s heaviest consumer nation will dent global sentiment,” Adrian Ash, director of research at BullionVault told Bloomberg News. However, the rebound in London markets following Asian weakness shows bullish sentiment remains strong, he said.
Among jewellery stocks, Chow Tai Fook Jewellery Group fell as much as 12% in Hong Kong, Chow Sang Sang Holdings International shed more than 8 per cent, and Laopu Gold dropped over nine percent. Citigroup analysts said the tax change would likely see the industry raise prices.