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, breaking 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 forced liquidation, the bank will automatically revoke the client’s agency trading permissions and terminate the agency relationship.

“Reminder to personal clients who have not yet completed contract termination: please promptly handle contract extension closures, inventory sales, withdrawals, and termination operations. Our bank will continue to promote the termination and account closure of agency precious metals services.” Minsheng Bank also issued an announcement on March 17 regarding adjustments to its agency personal precious metals trading services.

It is understood that Minsheng Bank previously closed the buy and open position functions for agency personal precious metals spot and deferred trading on the Shanghai Gold Exchange starting from market close on July 22, 2022. As of market close on February 1, 2023, the bank began terminating and closing agency precious metals accounts for clients with no inventory or deferred positions.

Earlier, Ping An Bank also announced on March 10 adjustments related to its agency personal precious metals trading services, stating that since November 2021, it has gradually suspended spot real-time buying and deferred spot opening, and will gradually shut down related permissions and exit the business starting April 1, 2026, depending on circumstances.

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 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 invest more in 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 consider 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 pressure from price fluctuations, so 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 March, spot gold prices have been volatile. 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 the Research and Development Department 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. This has driven international crude prices sharply higher, raising concerns about inflation rebound and 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, faces opportunity costs that increase with rising US bond yields. Furthermore, profit-taking from earlier gains triggered technical sell-offs, jointly pressuring gold prices and 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 improvement’ 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, though delayed, will not be absent. Coupled with the ongoing trend of de-dollarization globally, steady central bank gold purchases, and weakening dollar credit, gold prices are likely to fluctuate upward.

“Operationally, investors are advised to stay on the sidelines in the short term, avoid bottom-fishing risks, and wait for support levels to be confirmed. In the medium to long term, they can consider gradual positions during pullbacks, 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, while remaining alert to potential risks like unexpected inflation spikes and geopolitical conflicts,” Qu Rui said.

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 library