Gold posts largest single-week decline in 43 years! This bank takes action to adjust!

Gold Investment Risks Increase, Banks Step In!

On March 21, China Merchants Bank announced a spread adjustment for 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. The spread for buying will increase by 2 yuan/gram, while the sell spread remains 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 a.m. Beijing time on March 22, the spot price of London gold 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 Times contacted China Merchants Bank as an investor. Customer service confirmed that the adjustment will indeed begin after 9:10 a.m. on March 23. The reason for this adjustment is the significant increase in recent gold price fluctuations. The bank is responding to market changes, ensuring transaction stability, and covering 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/gram, before the adjustment, the buy price at the same time would be 1,000 yuan/gram, and the sell price 997 yuan/gram, with a spread of 3 yuan/gram. After the adjustment, the buy price will be 1,002 yuan/gram, and the sell price remains 997 yuan/gram, with a spread of 5 yuan/gram.

Xue Hongyan, a special researcher at Zhejiang Commercial Bank, pointed out that this adjustment of the gold savings spread by China Merchants Bank is a restructuring of transaction costs and risk management amid increased gold price volatility. Expanding the spread to 5 yuan/gram raises the friction cost per 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 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 control, it would implement dynamic trading limits on its gold products, including Easy Gold Savings.

At the end of February, Zhejiang Commercial Bank announced that if the gold market experiences significant abnormal price fluctuations, liquidity shortages, or a sharp decline in trading capacity, the bank may temporarily close its wealth gold savings business.

In January, ICBC announced that starting February 7, on weekends and statutory holidays when the Shanghai Gold Exchange is not trading, it would impose limits on its Ruyi Gold Savings business. Limits include maximum total or individual customer daily deposits/withdrawals, single transaction deposit or withdrawal caps, and other dynamic settings. Gold withdrawal services are unaffected.

Industry insiders pointed 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 Times 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” requiring matching 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 for long-term gains,” Xue concluded.