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

Everyday Economic News Reporter | Li Yuwen Everyday Economic News Editor | Zhang Yiming

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

The “Daily Economic News” reporter noted that 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.

Bank agencies on the Shanghai Gold Exchange’s personal precious metals business involve banks executing gold trading, fund clearing, and physical delivery transactions on behalf of individual clients based on their instructions. Due to recent market turbulence, many banks have made adjustments to these services.

On March 17, Postal Savings Bank announced the suspension of its agency personal precious metals trading services on the Shanghai Gold Exchange, reminding clients with open contracts or spot inventories to sell or close their positions as soon as possible through mobile banking channels. If operations are not completed by 0:00 on March 27, the bank will forcibly close positions or sell inventories. After forced liquidation, the bank will automatically revoke the client’s agency gold trading permissions and terminate the agency relationship.

“Reminder for individual clients who have not yet completed contract termination: please promptly handle contract extension closures, inventory sales, fund withdrawals, and termination procedures. 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 had already closed the buy and open position functions for its agency personal precious metals spot and deferred trading services 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 without spot inventories 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, it has gradually suspended spot real-time buying and spot deferred opening, and will gradually shut down related service permissions and exit this business starting April 1, 2026, as appropriate.

On March 19, Wu Zewei, a special researcher at Su Commercial Bank, told the “Daily Economic News” that from a market risk perspective, precious metal 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 invest more in investor education and risk monitoring. This imbalance between returns and risks leads banks to reassess the business value and proactively shrink their business lines to prevent potential risks.

Wu Zewei suggested 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 price volatility, so investors should be fully aware of these risks.

On the evening of March 18, spot gold experienced a sharp plunge during trading, with the lowest touching $4,806 per ounce. Although there was a slight rebound in the early trading hours on March 19, the decline continued in the afternoon, breaking through the $4,800, $4,700, and $4,600 levels successively.

Since March, spot gold prices have been fluctuating. Compared to 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 the “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 oil prices sharply higher, raising concerns about inflation rebound and prompting the Federal Reserve to delay interest rate cuts.

Qu Rui explained that the market’s rate cut expectations 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 runs 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. Simultaneously, profit-taking from previous gains triggered technical sell-offs, jointly exerting downward pressure on gold prices, creating an abnormal pattern of rising oil prices and falling gold prices.

Looking ahead, Qu Rui believes that gold prices will show a “short-term pressure, medium- to long-term improvement” trend. In the short term, high oil prices will keep the Federal Reserve’s high interest rate stance and a strong dollar, 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 expected to fluctuate and rebound.

For operations, Qu Rui recommends that investors remain cautious 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 position building, with gold constituting 5%–10% of their asset portfolio as a hedge. Key factors to watch include the Fed’s rate cut window and developments in Middle Eastern geopolitics, while remaining alert to potential risks such as unexpected inflation spikes and regional conflicts.