Core Viewpoint - The recent adjustments in tax rates for gold and diamonds are expected to directly impact the pricing of jewelry products promoted by leading brands, with a notable increase in consumer costs anticipated due to these changes [1][3]. Tax Policy Changes - The announcement from the Ministry of Finance and the State Administration of Taxation regarding gold tax policies was released on October 29, effective from November 1, 2023, until December 31, 2027, replacing previous tax regulations [1]. - The new tax policy categorizes gold usage into investment and non-investment types, with more significant tax adjustments for non-investment purposes [3]. Impact on Retail and Consumer Behavior - Retailers, such as Chow Tai Fook and Lao Pu Gold, have already adjusted prices multiple times this year, and the uncertainty surrounding further price changes due to the new tax policies adds pressure on brands [4]. - The introduction of a 7% tax on processed gold products, including jewelry, is expected to increase costs for consumers, although immediate price changes were not observed on the first day of the new policy [3][6]. Market Dynamics and Consumer Trends - The trend towards fixed-price gold products, particularly those featuring diamond inlays, has shown strong revenue potential, as evidenced by Chow Tai Fook's recent financial performance [4]. - The adjustment in tax policies may lead to a shift in consumer purchasing behavior, with potential growth in "goldsmith" shops that offer processing services for investment-grade gold purchased directly from banks [8]. Industry Implications - The new tax structure is likely to affect various segments of the gold supply chain, particularly wholesalers and retail stores, as they may be compelled to raise prices in response to increased costs [6][8]. - The retention of tax incentives for investment-grade gold at trading exchanges is expected to keep domestic gold prices aligned with international rates, minimizing extreme price fluctuations [9].

Core Viewpoint - The recent adjustments in tax policies for gold and diamonds are expected to increase the cost of jewelry for consumers, impacting major brands that have been promoting diamond-studded gold products. The announcement of these changes has created pressure on retailers, although immediate price adjustments have not yet been observed in stores [1][4][10]. Tax Policy Changes - On October 29, the Ministry of Finance and the State Administration of Taxation announced changes to gold tax policies, effective from November 1, 2023, until December 31, 2027. This includes the cancellation of previous tax exemptions for diamonds, which will now be subject to a 13% VAT [1][4]. - The new gold tax policy categorizes gold usage into investment and non-investment types, with more significant tax adjustments for non-investment purposes. Non-investment gold transactions will be exempt from VAT, allowing buyers to deduct 6% of the invoice amount as input tax [4][18]. Market Impact - Retailers, such as Chow Tai Fook and Lao Pu Gold, have reported feeling pressure from the new tax policies, although they have not yet raised prices in response to the changes. Store employees indicated uncertainty about future price adjustments due to the recent tax changes [9][10]. - The adjustments are expected to affect the entire gold industry supply chain, particularly impacting wholesalers and retail stores. The new tax structure may force retailers to increase prices to maintain margins as they face higher costs for raw materials [13][16]. Consumer Behavior - Observations from retail locations indicate a significant consumer interest in gold products, particularly those that have undergone multiple price increases this year. However, many customers are hesitant to make immediate purchases, reflecting uncertainty in the market [13][10]. - The introduction of the new tax policies has led to a temporary halt in price adjustments by retailers, as many are choosing to observe market reactions before making changes [16][10]. Future Trends - The new tax policies may lead to a rise in the popularity of gold processing shops, as consumers might seek to purchase investment-grade gold directly and process it themselves to avoid higher retail prices. This shift could challenge the traditional pricing models of established jewelry brands [16][18]. - The tax policy retains certain benefits for investment-grade gold, which may help stabilize prices in the market and prevent extreme fluctuations compared to international gold prices [18].