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Shanghai Pudong Development Bank announced on September 8 that it would officially stop offering personal precious-metals agency services through the Shanghai Gold Exchange, known as the SGE, after September 25. Viewed in isolation, the announcement could easily be mistaken for an individual bank's temporary response to recent volatility in gold prices. But a longer view of the timeline shows that it is actually the final phase of a regulatory tightening campaign that has been more than five years in the making.

Since the second half of 2025, more than 14 large and medium-sized mainland banks, including Postal Savings Bank of China, Industrial and Commercial Bank of China, China Construction Bank, Bank of Communications, China Merchants Bank, China Guangfa Bank, Hua Xia Bank, Ping An Bank, Industrial Bank, China CITIC Bank, Bank of China, China Everbright Bank, Agricultural Bank of China and Bank of Ningbo, have successively issued notices to suspend entirely or substantially tighten their agency services for precious-metals deferred spot contracts. According to information on the SGE's website, the exchange currently has 25 member banks classified as financial institutions. The latest tightening wave has therefore affected more than half of its banking members.

This is not a new story, but a sequel to the events of six years ago

To understand why banks are collectively retreating even as gold prices remain in a bull market, it is necessary to return to 2020. That year, a crude-oil investment product offered by Bank of China was linked to the settlement price of the May US crude futures contract, which fell into negative territory. Large numbers of individual investors not only lost their entire principal but also ended up owing the bank several times their original investment. The incident prompted regulatory intervention, and banks' financial-derivatives businesses entered a tightening cycle. By the end of November that year, the country's six largest lenders — ICBC, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and China Merchants Bank — had already suspended the opening of precious-metals accounts for new personal customers.

Several analysts who track the gold market said regulators had, about three years ago, already used informal guidance to require the banking sector to stop adding new personal “gold-trading” customers on the SGE. In other words, the suspension notices issued this year are dealing with existing accounts that were frozen more than three years ago but had not yet been fully closed, rather than reflecting a defensive move newly conceived by banks this year. The change this year is that the tightening has escalated from “suspending new account openings” to requiring even existing customers to close positions and accounts, and in some cases halting the entire business.

It is worth noting that, according to a response from an ICBC customer-service representative to media enquiries, the immediate source of the latest suspension was actually the SGE's own decision to shut down personal-customer trading across the board. Banks, as exchange members, were implementing the decision rather than making independent commercial judgments — a point omitted entirely from the original article, but one that affects how responsibility for the retrenchment should be understood.

Margin requirements raised to 140%, effectively eliminating leverage

The main products being discontinued are the SGE's Au(T+D) gold deferred-settlement contracts and similar silver contracts. These products carry leverage: investors need to put up only a certain proportion of the contract value as margin and can take positions in either direction. This can improve capital efficiency in calm markets, but during sharp swings leverage can amplify losses and even result in losses exceeding the margin.

This year, international gold prices have been far more volatile than stated in the original article. Spot gold has repeatedly hit record highs, rising from about US$4,400 at the beginning of the year to briefly reach US$5,500 in January 2026, before falling back and consolidating around US$4,400 to US$4,500. The original article's reference to a record high of US$4,350 is significantly out of date. Given current price movements, US$4,350 is no longer a high but a level that was surpassed some time ago during the bull market.

Against this backdrop of extreme volatility, several banks have sharply raised their margin requirements. Industrial Bank increased the margin ratio for the relevant deferred contracts from 40% to 120%, while China CITIC Bank also raised it to 120%. Bank of China's margin ratio for gold deferred contracts rose from 99.9% to 120%, while that for silver contracts increased from 99.96% to 119.91%. China Guangfa Bank went further, raising the ratio to 140%, the highest among its peers. Industry insiders said that once the margin ratio exceeds 100%, the leverage multiple has effectively fallen to zero, leaving individual investors unable to conduct any form of leveraged trading through banks' agency channels.

The banks' calculation: a low-margin business with high risk-control costs

Even without regulatory pressure, the business had long offered little appeal to banks. Precious-metals agency services are “light-capital, heavy-operations” businesses. Fees per contract are low and have been squeezed further by competition, leaving the contribution from intermediary business almost negligible in the financial statements of major lenders. By contrast, banks must bear substantial hidden costs, including direct connectivity fees for trading systems, round-the-clock risk monitoring, compliance teams, and a surge in customer complaints and dispute resolution during periods of sharp price volatility. “Risk control takes priority over commission income” has become a bottom-line principle that bank managements can hardly ignore.

Where the money goes: gold savings plans and ETFs become designated alternatives

Once leveraged channels close, the money does not simply disappear. Instead, it is being directed towards de-leveraged alternative products. Several banks, including China Guangfa Bank and SPDB, have explicitly advised customers in their notices to switch to gold savings plans or gold ETFs. Both products remove the leverage element, leaving investors with either the right to take physical delivery or fund beneficiary interests. This means that for individual investors seeking to engage in high-frequency precious-metals speculation through traditional banking channels, the route is effectively closed. Asset allocation will have to shift towards longer-term, lower-volatility core holdings.

Three indicators to watch

The industry's retreat is only the prelude. Several indicators merit continued attention:

First is the level of net subscriptions to on-exchange gold ETFs and bank gold savings products, the most direct indicator of whether retail money is genuinely moving towards long-term allocations. Second are the premiums on physical gold bars sold by major commercial banks and the discounts applied on repurchases, which can reflect households' actual willingness to convert gold into cash. Third is the frequency of changes in gold holdings within central banks' foreign-exchange reserves. The People's Bank of China has continued increasing its gold reserves for more than a year, providing an important reference point for assessing longer-term support for gold prices.