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China’s jewellery retailers are reeling from gold’s blistering rally and the reduction of a tax rebate as high prices have deterred buyers and led to hundreds of store closures in one of the world’s largest consumer markets for the metal.

Large retail chains have reduced their footprint in mainland China this year, while a number of small sellers told the Financial Times that rising prices and a growing tax burden had torpedoed sales.

The price of gold has jumped by half this year to more than $4,000 a troy ounce as investors pile into the asset as a hedge against geopolitical uncertainty, growing levels of global government debt and concerns over a falling dollar.

In China, where gold jewellery is traditionally purchased as a wedding gift or as a store of value, high prices for the commodity have run up against weak consumer sentiment amid slowing economic growth.

Retailers are also adapting to new rules introduced this month that increase taxes on gold jewellery purchases by cutting a long-standing rebate. The higher tax burden has pushed sellers to raise prices further, they said.

“This industry is quite difficult at the moment, especially after the tax increase,” said Fifi Zheng, who helps run Aiyisheng, her family’s business based in Shenzhen’s gold trading district Shuibei. “Lots of Chinese consumers aren’t buying, so it’s quite hard to accept [the tax], even though it only adds a couple dozen renminbi per gramme.”

While gold purchases for weddings were holding up, everyday purchases had “fallen maybe 40 to 50 per cent” since the new rules were introduced, she added.

Chow Tai Fook, China’s biggest jewellery retailer by sales, has closed about 1,000 mainland stores this year, a reduction of 15 per cent. The company on Tuesday reported net profit of HK$2.5bn (US$320mn) in the half-year to the end of September, unchanged from a year earlier, on HK$39bn of revenue, its lowest in five years.

Chow Tai Fook managing director Kent Wong said in an earnings presentation that the company had closed underperforming stores as part of a shift away from lower-tier to more affluent cities, which were experiencing a “better recovery in consumer demand”.

Over the past year, rival operator Lukfook has closed more than 200 mainland stores, reducing its total store count since the start of the year by 7 per cent. The company on Thursday said half-year revenue to the end of September increased 26 per cent to HK$6.8bn compared with the same period last year, while net profit rose by 42.5 per cent to HK$619mn.

Lukfook said: “Despite the high gold prices, the retailing business in the mainland market showed continued improvement.” It added that it was still evaluating implications of the tax policy change.

Carlton Lai, an analyst at Daiwa Capital Markets, said the store closures followed a period of overexpansion during Covid-19 when spending was more robust.

“As consumption slowed, the productivity of these stores declined significantly,” he said, adding that the issue was compounded by growing competition from newer brands and surging gold prices.

In Shuibei — where thousands of shops crammed into multistorey malls handle transactions equal to 70 per cent of the Shanghai Gold Exchange’s annual deliveries of the metal, according to state media — sellers were dour. Many complained the new tax had come at the wrong time.

“Our prices were already high and now they’re higher after the tax,” said Chen, a Shuibei seller who declined to give her full name. “If [customers] want to get married, there’s no other choice: they just buy less.”

Daiwa’s Lai said the tax change aimed to curb speculative purchases of gold jewellery and could push low-quality retailers out of the market.

They could also reduce unregulated over-the-counter transactions in favour of trading through the Shanghai Gold Exchange and close tax refund loopholes, he said.

While jewellery sellers are struggling, demand for gold investment products has risen as retail traders search for ways to gain exposure to the metal. The new tax rules do not apply to investment products.

Holdings of domestic gold exchange traded funds increased 164 per cent to 194 tonnes in the first three quarters of this year, according to the China Gold Association.

“The panic caused for people in the industry by this tax policy hasn’t yet subsided,” said Li Zhaofen, a Shuibei retailer and wholesaler. “This is because gold has been tax free for the past 20 years . . . the future direction remains unclear.”

Additional reporting by Haohsiang Ko in Hong Kong

The two sides had been in a standoff over the implementation of the West African country’s new mining code that gave Mali a bigger share of revenue from gold miners as gold prices surged to a record high.

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The agreement included Mali releasing the four employees from prison, where they had been held since November 2024, according to a statement from the company.

The sources who confirmed the release asked not to be named because they were not authorised to discuss the matter.

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