Gold experienced a brief plunge after the China-U.S. meeting, with multiple national banks still warning of investment risks. Why is gold not favored amidst sharp rises and falls?

On the morning of May 12, after China announced that the China-US meeting had reached "important consensus," spot gold prices fell to $3,260 per ounce, dropping over 2% intraday.

In stark contrast, following the recent clashes between Pakistan and India in the Kashmir region, COMEX gold futures rose 0.82% to $3,333 per ounce on May 10, with a cumulative increase of 2.8% for the week. On the afternoon of May 9, spot gold prices even surged to $3,338 per ounce.

As May progresses, the fluctuating trend of international gold prices at high levels seems to have become the norm. In the view of industry insiders, considering the ongoing geopolitical uncertainties and tariff disputes, the recent volatility in gold prices is understandable, and investors, especially futures investors, need to enhance their risk awareness.

Cailian Press reporters noted that as the primary channel for ordinary people to participate in gold investment, several national commercial banks, including China Construction Bank, Industrial and Commercial Bank of China, Bank of China, China Merchants Bank, and China Everbright Bank, have continued to issue announcements recently, raising the minimum subscription amount for gold accumulation plans and explicitly warning that "investment involves risks."

Several industry insiders told Cailian Press reporters that, objectively speaking, drawing lessons from past incidents like the crude oil treasure and paper gold events, banks do not hope for sharp fluctuations in gold prices, especially for gold accumulation plans.

Unexpected volatility in international gold prices is intensifying.

A macro analyst from a securities firm who has long tracked gold trends told Cailian Press reporters that the surge in international gold prices this year has exceeded the estimates of many industry insiders. According to the research of his institution, a price of $3,000 per ounce is already a reasonable range considering supply and demand factors. However, gold prices have continued to hit new highs since then, primarily due to the "butterfly effect" triggered by Trump's tariff disputes, which led to a significant influx of safe-haven funds into the gold market, coupled with speculation, resulting in mixed performance and fluctuating trends in gold prices recently.

On May 11, a report released by Guosheng Securities analysts Zhang Hang, Chu Jinna, and He Chengyang pointed out that bullish and bearish factors intertwined over the past week, leading to increased volatility in gold prices. On May 7, data from the official website of the People's Bank of China showed that China's gold reserves increased by 70,000 ounces MoM at the end of April, marking the sixth consecutive month of gold purchases. The average/highest/lowest prices of COMEX gold in April were $3,236, $3,510, and $2,970 per ounce, respectively, which may serve as reference support levels for future gold price movements.

"Geopolitical conflicts remain unresolved, and tariff disputes are unlikely to reach a consensus in the short term. Overall, gold prices are expected to remain volatile this year, and investors need to enhance their risk prevention awareness."The analysts held the above views.

Multiple banks have intensively issued risk warnings, with the minimum purchase amount for individual clients' gold accumulation raised to 1,000 yuan.

Although banks objectively benefited from the strong gold prices last year, many have recently issued announcements to increase the minimum purchase amount for gold accumulation and issue risk warnings.

The latest case is that on May 9, China Construction Bank stated on its official website that the recent intensified fluctuations in domestic and overseas precious metal prices have increased market risks. Clients are advised to enhance risk awareness in precious metal business, reasonably control positions, promptly monitor open interest and margin balance changes, and invest rationally.

Additionally, to strengthen business risk management, China Construction Bank has raised the minimum amount for regular gold accumulation (including daily average and self-selected day accumulation) from 800 yuan to 1,000 yuan starting from 9:10 on May 6.

Besides CCB, other national commercial banks such as ICBC, Bank of China, China Merchants Bank, and China Everbright Bank have also issued announcements to increase the minimum purchase amount for gold accumulation and explicitly warned that "investment carries risks." Among them, China Merchants Bank has raised the minimum purchase amount for gold accumulation four times this year, directly increasing it from 750 yuan to 1,000 yuan. According to information from major banks' official websites, the threshold for ordinary people to purchase gold accumulation has now been raised to 1,000 yuan.

Several industry insiders told Caixin reporters that, objectively speaking, referring to past incidents like the crude oil and paper gold events, banks do not want to see sharp fluctuations in gold prices, especially in gold accumulation business. An insider from a listed bank in Jiangsu, Zhejiang, and Shanghai told Caixin reporters that after the bank raised the minimum purchase amount for gold accumulation, the number of subscribing clients did not increase. This means that if the purchase threshold is repeatedly raised, banks' fee income will decrease instead.

"Overall, currently, banks mainly play the role of channels and intermediary platforms in the gold trading market, and everyone hopes to steadily collect fees from it," the above-mentioned bank insider in Jiangsu, Zhejiang, and Shanghai admitted. From the perspective of risk avoidance, many banks currently do not invest much in their proprietary gold business (derivative trading). This phenomenon may be difficult to change in the short term.

Benefiting from the 'crazy gold,' many banks had a good harvest in their gold business last year.

Caixin reporters noted that in the past week, many banks have become the focus of public opinion due to their gold business.

For example, a netizen revealed on social media that a friend purchased gold bars at a branch of ICBC in Shanghai, and the melted substance was suspected not to be pure gold.The topic "Buying adulterated gold bars from banks" thus trended on Weibo. However, on the evening of May 9, the ICBC Jiading Sub-branch in Shanghai responded that, after verification, the situation was untrue. Detection reports for the two types of gold bars both recorded a detection conclusion: the gold content was 99.99%, with no quality issues. So, apart from selling gold bars and gold ingots, what are the other mainstream gold businesses currently offered by banks?

An insider from a joint-stock bank told a reporter from Caixin that, in addition to physical gold businesses, many banks currently offer common services including gold accumulation plans, wealth management products linked to gold, precious metal financing leasing, and precious metal futures/options derivatives trading, among others. After some insurance institutions were recently approved to enter the gold trading market, "another trading channel has been added."

Yu Zhi, a researcher at Use Trust, previously told a reporter from Caixin that gold-linked wealth management products fall within the extended scope of fixed-income+ products, but the number of such products issued is not large.

"The gold market business is an important part of a bank's intermediate income business. Banks are an important channel for investors to trade gold ETFs. Last year, with the sharp rise in gold prices, banks' intermediate income also benefited significantly," the aforementioned macro analyst pointed out. After the paper gold business was suspended, influenced by the current strong cycle of gold, banks' related businesses have also picked up recently.

A Caixin reporter noted that, judging from the annual reports of some banks, the gold business has indeed become one of the highlights of last year.

For example, the Industrial and Commercial Bank of China's (ICBC) annual report disclosed that, as of the end of 2024, on ICBC's balance sheet, the bank's precious metal assets were 172.144 billion yuan, compared to only 114.928 billion yuan in 2023; the group's precious metal assets were 208.242 billion yuan, compared to 139.425 billion yuan in 2023. This means that ICBC and its subsidiaries saw significant growth in their gold businesses last year.

In addition, the Agricultural Bank of China's annual report also pointed out that, as of the end of 2024, the bank's direct and agency gold trading volume was 5,992.28 mt. The bank's physical precious metal sales in 2024 were 26.671 billion yuan, a 68.5% increase from the previous year. The Postal Savings Bank of China's annual report also disclosed that, in 2024, the bank's precious metal business trading volume increased by 136.47% YoY, and revenue increased by 105.51% YoY. The Industrial Bank's annual report also disclosed that, last year, the bank effectively capitalized on the fluctuations in the gold market to achieve rapid growth in precious metal business volume and revenue, with revenue increasing by 100% YoY during the reporting period.