Gold prices bounced back to about $4,020 per ounce on Monday morning, recovering from an earlier dip as investors weighed fresh signals from the United States Federal Reserve and a major policy shift in China, two forces now reshaping the global bullion market.
The rebound came after last week’s much-anticipated rate cut by the Fed, which Chair Jerome Powell suggested could be the last for the year. Powell pointed to the ongoing US government shutdown and limited economic data as reasons for caution.
His remarks cooled earlier hopes for more aggressive rate easing, with market odds for another cut in December slipping to around 70%, down from over 90% before his comments.
At the same time, optimism from a new US-China trade understanding has softened the appeal of gold as a safe haven. Presidents Donald Trump and Xi Jinping agreed to extend their tariff truce, relax some export restrictions, and open the door for smoother trade flows.
That thaw in tensions lifted broader market sentiment, but it came with a surprising twist from Beijing that could ripple through global gold demand.
In a move that caught traders off guard, China scrapped a long-standing tax incentive on gold sales effective November 1. The Ministry of Finance announced that retailers will no longer be allowed to offset value-added tax (VAT) when selling gold bought through the Shanghai Gold Exchange, whether in investment form, such as bars, coins, or ingots, or as jewellery and industrial products.
That may sound like a small technical adjustment, but it’s big news for the world’s largest gold consumer. For years, the tax offset helped Chinese retailers keep prices competitive and margins steady. Now, with the perk gone, those costs will likely be passed down to buyers, potentially lifting retail gold prices and dampening demand among middle-class consumers already feeling the pinch from a slow economy and the country’s property slump.
Analysts say the timing of the decision reflects Beijing’s need to shore up tax revenues and tighten oversight of bullion trade. But it could also make gold less attractive domestically, at least in the short term, just as Chinese consumers were returning to jewellery stores after months of sluggish spending.
Globally, the change adds a new layer of uncertainty to a market already juggling interest-rate expectations, currency swings, and shifting investor appetite. While the easing of trade tensions may reduce safe-haven buying, a slowdown in Chinese demand could also limit price momentum at a time when gold is hovering around record highs.
Still, gold remains a barometer of global mood, a metal that shines brightest when investors grow nervous. And though Monday’s rebound showed resilience, the world’s oldest store of value may face a more complicated path ahead, shaped as much by central bank caution as by Beijing’s bold tax experiment.
