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 Take Action!

On March 21, China Merchants Bank announced a spread adjustment for its gold account services. 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/gram, with the buy side spread increasing by 2 yuan/gram and the sell side spread remaining unchanged. This adjustment is expected to remain in effect 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/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 called China Merchants Bank as an investor, and customer service confirmed that the adjustment would indeed begin after 9:10 AM on March 23. The reason for this adjustment is the significant increase in recent gold price fluctuations, and the bank’s need to adapt to market changes while ensuring transaction security and covering operational costs.

What is a spread? “When investors buy gold savings from the bank, they usually see 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/gram, before the adjustment, the buy price at the same time would be 1,000 yuan/gram, and the sell price would be 997 yuan/gram, with a spread of 3 yuan/gram. After the adjustment, the buy price at the same time will be 1,002 yuan/gram, and the sell price remains 997 yuan/gram, making the spread 5 yuan/gram.

Xue Hongyan, a special researcher at Industrial Bank, pointed out that this adjustment of the gold savings spread by China Merchants Bank is a restructuring of transaction costs and risk management in response to increased gold price volatility. Expanding the spread to 5 yuan/gram raises the friction cost for each buy-sell transaction 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 Hongyan said.

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

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

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

In January, ICBC announced that starting February 7, on weekends and statutory holidays and other non-Shanghai Gold Exchange trading days, it would impose limits on its Ruyi Gold Savings business. These limits include total or single-client daily savings/redemption caps, single transaction maximums, and other dynamic settings. Gold withdrawal services 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 Zhaolian 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 product positioning: from a low-threshold “savings substitute” to a “investment product” that requires matching appropriate risk tolerance.

“If you still choose to participate, you need to recognize that transaction costs will erode returns, and focus should shift back to asset allocation or physical accumulation with a long-term perspective,” Xue Hongyan concluded.

(Edited by: Wen Jing)

Keywords: Gold Gold Price