Gold experiences its largest single-week decline in 43 years! This bank is taking action to adjust!

Source: Securities Times Network Author: Lin Yu

Gold Investment Risks Increase, Banks Step In!

On March 21, China Merchants Bank announced a spread adjustment for its gold account services, indicating that due to recent increased volatility in the gold market, starting March 23, the bank will adjust the buy-sell spread for gold account transactions at the same quote time to 5 yuan per gram. The buy side spread will increase by 2 yuan per gram, while the sell side spread remains unchanged. This adjusted spread plan is expected to run until June 27. From the market opening on June 29, China Merchants Bank will adjust the buy and sell spreads at the same quote time to 2.5 yuan per gram each.

As of 3:00 AM Beijing time on March 22, the London gold spot price fell below $4,500 per ounce, closing at $4,491.67 per ounce, a weekly decline of 10.49%. Data shows this is the largest weekly drop since March 1983.

A reporter from Securities Journal contacted China Merchants Bank as an investor, and customer service confirmed that the adjustment would indeed take effect after 9:10 AM on March 23. The bank stated that the adjustment is due to the significant increase in recent gold price fluctuations, and it is a response to market changes to ensure smooth trading and cover operational costs.

What is a spread? “When investors buy gold savings from the bank, they usually look at two prices: the buy price (the price at which you buy from the bank) and the sell price (the price at which you sell to the bank). The difference between these two prices is called the ‘spread’,” industry insiders explained.

Specifically, if the China Merchants Bank gold account interface shows a price of 1,000 yuan per gram, before the adjustment, the buy price at the same time would be 1,000 yuan per gram, and the sell price would be 997 yuan per gram, with a spread of 3 yuan per gram. After the adjustment, the buy price at the same time would be 1,002 yuan per gram, and the sell price remains 997 yuan per gram, making the spread 5 yuan per gram.

Xue Hongyan, a special researcher at Shanghai Commercial Bank, pointed out that this spread adjustment by China Merchants Bank is a restructuring of transaction costs and risk management amid increased gold price volatility. Expanding the spread to 5 yuan per gram raises the friction cost for each trade and significantly increases the profit threshold for short-term trading.

“This move not only increases trading resistance, guiding investors from ‘quick in and out’ trading to long-term holding to curb market speculation, but also helps the bank lock in more stable intermediary income during volatile markets to cover liquidity and hedging costs,” Xue said.

This is not the first bank to change its gold savings trading rules recently.

On March 3, China Construction Bank announced that to further strengthen risk prevention, it would implement dynamic trading limits on its Gold (including Easy Gold) products.

At the end of February, Zhejiang Commercial Bank announced that if there are significant abnormal fluctuations in gold prices, market liquidity dries up, or trading capacity declines sharply, the bank might temporarily suspend its wealth gold savings business.

In January, ICBC announced that starting February 7, on weekends and statutory holidays (non-trading days of the Shanghai Gold Exchange), it would impose limits on its Ruyi Gold Savings business, including total or single-client daily savings/redemption limits, and limits on individual transactions, with dynamic adjustments. The gold price increase product would not be affected.

Industry insiders point out that these adjustments send a clear signal to investors: the role of gold savings as a short-term trading tool is weakening.

Dong Ximiao, Chief Economist at LianLian and Deputy Director of Shanghai Financial and Development Laboratory, told Securities Journal that such measures are aimed at addressing potential systemic risks caused by extreme gold price fluctuations. Banks’ risk control strategies are shifting from “static defense” to “dynamic game,” reflecting a recalibration of gold savings products: from a low-threshold “savings substitute” to a “investment product” that requires matching corresponding risk tolerance.

“If you still choose to participate, you need to recognize that trading costs will erode returns, and focus should shift back to asset allocation or physical accumulation for long-term gains,” Xue said.

(Edited by: Wen Jing)

Keywords: Gold Gold Price