Gold held steady at $4,000 on Monday, as traders assessed the end of China’s long-running tax cut for some retail traders, according to Mining.com. By midday in New York, the spot gold price rose 0.2% to $4,009.58 per ounce, after falling as much as 1% earlier. US gold futures also rose 0.6% to $4,020.80 an ounce.
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Gold investors are still digesting Beijing’s announcement on Saturday that it will no longer allow some retailers to fully offset value-added tax when selling gold they bought on the Shanghai exchanges. The tax change “will likely see the entire industry raise prices to weather cost pressures,” Citigroup analysts, including Tiffany Feng, wrote in a note.
The VAT exemptions “may not be immediately relevant to gold prices as Chinese end-user gold demand has remained lackluster for several months,” said Dan Ghaly of TD Securities, noting that wholesale demand in China was 28% below its five-year average during the previous quarter.
Gold prices rose to a record high in October, driven by a retail buying frenzy in key markets such as China. However, the metal has fallen sharply since then, with exchange-traded gold products recording two consecutive weekly declines in total holdings. However, gold is still up more than 50% this year, even after the recent pullback. Many of the fundamentals that fueled the rally, including central bank and safe haven demand, are expected to remain in place, with many industry experts predicting prices will reach $5,000 within a year.
Source: Market intelligence platform IndexBox
