Spot gold continues to decline, breaking below the $4,600 mark! Multiple banks tighten personal precious metals agency business

Market News Reporter | Li Yuwen Market News Editor | Zhang Yiming

On March 19, spot gold continued to decline, dropping below the $4,600 mark during trading. As of the time of writing, it was at $4,541 per ounce, down 5.87%, hitting a new low since February 6.

According to reporters from Daily Economic News, amid intense market volatility, several banks recently announced adjustments to their agency personal precious metals trading services on the Shanghai Gold Exchange, including increasing margin requirements and promoting contract termination and account closure.

Multiple banks tighten agency personal precious metals services

Banks acting as agents for the Shanghai Gold Exchange’s personal precious metals trading, which involves buying and selling precious metals, fund clearing, and physical delivery based on individual client instructions, have recently made adjustments due to market turbulence.

On March 17, Postal Savings Bank announced the suspension of its agency services for personal precious metals trading on the Shanghai Gold Exchange, reminding clients with existing contracts or inventory to quickly sell or close their positions via mobile banking. If not completed by 0:00 on March 27, the bank will forcibly close or sell the inventory of relevant accounts. After the forced closure, the bank will automatically revoke the client’s agency trading permissions and terminate the agency relationship.

“Once again, we remind individual clients who have not yet completed contract termination to promptly close positions, sell inventory, withdraw funds, and terminate agreements. We will continue to promote the termination and account closure of agency precious metals services,” said Minsheng Bank in an announcement on March 17 regarding adjustments to its agency personal precious metals trading services.

It is reported that Minsheng Bank had already shut down the buy and open position functions for agency spot and deferred trading of personal precious metals on the Shanghai Gold Exchange from the market close on July 22, 2022, and as of market close on February 1, 2023, had terminated and closed agency precious metals accounts for clients with no inventory or deferred positions.

Earlier, Ping An Bank also announced on March 10 adjustments to its agency personal precious metals trading services, noting that since November 2021, the bank has gradually suspended spot physical buy-in and deferred opening of positions, and from April 1, 2026, will gradually close related permissions and exit the business as circumstances permit.

On March 19, Wu Zewei, a special researcher at Su Commercial Bank, told Daily Economic News that from a market risk perspective, precious metals prices are highly volatile, and leveraged deferred trading is prone to margin breach risks. Individual investors have relatively weak risk control capabilities, and banks, as members, bear the responsibility for clearing and advance payments, with risk exposure continuously expanding. In terms of business value, agency precious metals trading generates limited commission income but requires banks to invest significant resources in risk control and compliance management, further squeezing profit margins. Additionally, regulatory requirements for investor protection are increasing, prompting banks to spend more on investor education and risk monitoring. This imbalance of benefits and risks leads banks to reassess the value of the business and proactively shrink their operations to prevent potential risks.

Wu Zewei mentioned that if investors view gold as part of their long-term personal asset allocation, they can choose physical gold, accumulated gold, or gold ETFs, and should scientifically assess their risk tolerance, avoiding investing with non-own funds. Currently, gold prices have experienced a short-term rapid rise followed by volatility, and investors should be fully aware of these risks.

Spot gold continues to fall

On the evening of March 18, spot gold plunged sharply during trading, with the lowest touching $4,806 per ounce. Although there was a slight rebound in the morning of March 19, the decline continued in the afternoon, breaking through the $4,800, $4,700, and $4,600 levels consecutively.

Since the beginning of March, spot gold prices have been fluctuating. From the high of $5,598.75 per ounce in January this year, the decline has exceeded 15%.

“Such counterintuitive movement in gold prices mainly stems from the significant suppression of safe-haven logic by interest rate dynamics,” said Qu Rui, Senior Deputy Director of Research and Development at Orient Securities, in an interview with Daily Economic News on March 19. He explained that the escalation of US-Iran conflicts has led to continued disruptions in the Strait of Hormuz, a major artery for global oil transportation, coupled with a sharp drop in oil production in southern Iraq, tightening crude oil supply, and driving up international oil prices. This has directly increased concerns about inflation rebound, prompting the Federal Reserve to delay interest rate cuts.

Qu Rui explained that market expectations for rate cuts have cooled, leading to a rise in US Treasury yields and the US dollar index. Additionally, recent liquidity tightening caused by US private equity credit withdrawals has made the dollar a safe haven and yield asset, diverting risk-averse funds. Meanwhile, gold, as a non-interest-bearing asset, sees its opportunity cost rise with US Treasury yields. Furthermore, profit-taking from earlier gains has triggered technical sell-offs, jointly pressuring gold prices downward, creating an unusual pattern of rising oil prices and falling gold prices.

“Looking ahead, gold prices are expected to show a ‘short-term pressure, medium- to long-term recovery’ trend,” Qu Rui said. In the short term, high oil prices will keep the Federal Reserve’s high interest rate stance and the dollar strong, continuing to suppress gold. In the medium to long term, as the effect of rising oil prices diminishes and inflation gradually recedes, the Fed’s rate cut cycle will eventually arrive, albeit delayed. Coupled with ongoing global de-dollarization, steady central bank gold purchases, and weakening dollar credit, gold prices are likely to fluctuate upward.

“Operationally, I recommend investors stay on the sidelines in the short term to avoid bottom-fishing risks and wait for support levels to confirm; in the medium to long term, they can consider gradual positions, allocating 5%–10% of their portfolio to gold as a hedge. Focus on key catalysts such as the Fed’s rate cut window and Middle East developments, and remain alert to potential risks like unexpected inflation spikes and geopolitical conflicts,” Qu Rui advised.

Disclaimer: The content and data in this article are for reference only and do not constitute investment advice. Please verify before acting. Use at your own risk.

Cover image source: Daily Economic News Media Asset Library