Major Chinese banks suspend individual trading on Shanghai Gold Exchange amid volatility

Chinese banks are accelerating efforts to scale back retail trading of precious metals, with the price of gold below US$4,000 an ounce for the first time since November, highlighting growing volatility in a market that has lost nearly 30 per cent of its value since peaking earlier this year.
Industrial and Commercial Bank of China (ICBC) said on Wednesday it would stop offering individual trading in precious metals linked to the Shanghai Gold Exchange from July 24.
The move follows similar announcements by Postal Savings Bank of China, Ping An Bank and China Guangfa Bank, which have suspended or are preparing to exit the same trading market.
The move comes as gold prices have retreated sharply from record highs reached earlier this year, prompting banks to tighten risk controls on precious metal trading products.
Spot gold briefly fell below US$4,000 an ounce on Wednesday, extending a sharp sell-off driven by a stronger US dollar and amid expectations that interest rates could remain high. Gold has retreated significantly from a peak of nearly US$5,600 an ounce reached earlier this year.
Investors have also scaled back expectations for Federal Reserve rate cuts, while rising US Treasury yields have reduced the appeal of non-yielding assets such as gold.
Banks have responded by tightening risk controls on products that allow margin trading of precious metals for individuals. Several lenders, including Bank of China and China CITIC Bank, have raised margin requirements this month, with some reaching 140 per cent.
A margin ratio above 100 per cent means investors must post collateral exceeding the value of their positions, which is designed to reduce the appeal of speculative trading.

ICBC said the suspension would cover a range of gold and silver contracts traded through the Shanghai Gold Exchange. Customers were urged to close positions, sell holdings or take physical delivery before the service is terminated.
Most banks had already stopped allowing new retail positions in Shanghai Gold Exchange-linked precious metals products in recent years under regulatory guidance, meaning the latest measures primarily affect existing customers.
“Chinese banks are tightening retail precious metals trading as a risk-control response to heightened price volatility,” said Robin Tsui, gold strategist for the Asia-Pacific region at State Street Investment Management.
Tsui said the measures were intended to curb speculative activity and were unlikely to undermine long-term gold demand in China, which is driven primarily by physical investment and strategic allocation.
The recent sell-off has also prompted investment banks to lower their forecasts. Goldman Sachs cut its year-end gold target to US$4,900 an ounce from US$5,400, while Deutsche Bank reduced its fourth-quarter forecast by 17 per cent to US$4,800.
The latest moves also reflect a broader regulatory shift that predates the recent decline in gold prices.
Iris Tan, senior equity analyst at Morningstar, said regulators have been tightening controls on high-volatility retail trading products since the 2020 “Crude Oil Treasure” scandal, when retail investors suffered heavy losses on a Bank of China oil-linked investment product.
“The current wave of suspensions is simply the next phase of that same trend,” Tan said. “Banks have been narrowing their retail risk boundaries for years.”