UBS remains bullish on gold: strong buying, with "shift of interest" expected in the Chinese market.

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Recently, China's gold market has ushered in a key adjustment to its tax regime.

The Ministry of Finance and the State Administration of Taxation have implemented differentiated value-added tax (VAT) policies for standard gold traded through the Shanghai Gold Exchange and the Shanghai Futures Exchange.

As domestic investors focus closely on this, UBS Wealth Management Chief Investment Office (CIO) shared its views, believing the new rules may accelerate the concentration of gold trading in China.

Zishitang has obtained this UBS buy-side research report and has summarized the main points as follows for the readers.

Investors' Interests Will Shift

UBS Wealth Management pointed out: China is one of the world's largest gold consumers, so related policies are worth attention. Considering the high base price and weak jewelry demand, we therefore expect the impact of the new tax regime to be relatively limited.

"The new rules may accelerate the concentration of gold trading in China, and the continued VAT exemption for gold ETFs may further shift interest in gold towards these investment products," UBS Wealth Management predicts.

According to the new policy announcement: until the end of 2027, for members or clients trading standard gold through the Shanghai Gold Exchange or Shanghai Futures Exchange, the seller (member or client) will be exempt from VAT on sales of standard gold. If no physical delivery has occurred, the exchange is exempt from VAT; if physical delivery occurs, the policy distinguishes between investment and non-investment uses of standard gold, and applies immediate VAT refund policies, VAT exemption policies, and a 6% deduction rate for buyers as appropriate.

Gold Target Price: $4,200/oz

This UBS buy-side institution believes: The policy has little impact on global gold prices; robust investment and continued central bank purchases remain the main drivers. The recent gold retracement seems more technical than fundamentally driven.

"We maintain an optimistic outlook, with a 12-month target price of $4,200/oz."

Strong International Capital Buying

UBS further analyzes the recent performance of international gold prices.

There are signs that investor buying remains strong. In the third quarter, gold ETF holdings increased sharply by about 222 tons; demand for gold bars and coins exceeded 300 tons for the fourth consecutive quarter, reaching 316 tons. Jewelry demand also exceeded expectations.

UBS buy-side advises investors to buy gold on dips, as it remains a good hedging tool in portfolios and current allocations to gold by investors remain relatively low.

"Historical data indicates that a single-digit percentage allocation of gold in a diversified U.S. dollar asset portfolio is most appropriate. If geopolitical or financial market risks intensify, gold prices may be pushed up to the bullish scenario of $4,700/oz. In addition, with high volatility in gold options, investors may consider enhanced income strategies," the UBS report writes.

Risk Warning and DisclaimerThe market carries risks; investment should be carried out cautiously. This article does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investments made based on this are at one’s own risk. ```