Chinese banks rein in retail gold trading on volatility

Some major Chinese banks are shutting down services that aid retail trading in precious metals, after a multiyear rally in gold and silver went into reverse in recent months.

Industrial & Commercial Bank of China Ltd., the nation’s biggest by assets, said it’ll stop offering intermediary services for individuals to trade precious metals on the Shanghai Gold Exchange after settlement on July 24. Existing clients are advised to sell or close their positions before then, it said in a statement on Wednesday.

China Guangfa Bank Co. asked clients to close their precious metals positions before 3:30 p.m. Hong Kong time on Thursday, or face forced liquidation by the end of the month, according to a notice on Monday. Investors can still put money into gold accumulation products or exchange-traded funds that track precious metals, it said.

The shutdowns mark one of the final steps undertaken by Chinese banks to curb retail trading in bullion. ICBC and some other lenders have restricted individuals from opening new positions on the main contract on the Shanghai Gold Exchange since 2022, while allowing them to sell gold or close their positions.

“Given that they’ve already limited individuals from opening positions, this move would not have major impacts,” said Song Jiangzhen, a researcher at Guangdong Southern Gold Market Academy.

Spot gold fell below $4,000 an ounce this week, extending its retreat from a record high of nearly $5,600 in January. The precious metal had more than doubled over the previous two years, but the rally unraveled after the outbreak of the US-Iran war stoked inflation fears, reinforcing expectations that interest rates would remain elevated.

Both banks cited risk management for the closures, which covered trading in both spot and deferred delivery contracts. The shutdown in services follows similar announcements by Postal Savings Bank of China Co. and Ping An Bank Co. earlier this year.

Banks have moved to gradually tighten thresholds over the past year for retail investment in precious metals, and warned against risks in the volatile trade that caused losses for even sophisticated investors like quantitative hedge funds.

Retail investors are still able to open trading accounts at the Shanghai Futures Exchange via brokerages, or invest in the so-called gold accumulation plans offered by commercial banks, where they can buy bullion incrementally over the long term.

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