A slew of leading Chinese banks have announced the suspension of trading of gold and platinum due to concerns over market volatility in the wake of the US presidential election.
Multiple Chinese banks issued emergency notices on Friday 27 November announcing the suspension of trading for precious metals accounts.
These banks included Agricultural Bank of China, China Merchants Bank, Bank of Communications and the Industrial and Commercial Bank of China.
Sources said to Cai Lianshe that the reason behind the suspension was “intense changes to the market environment” that could have led to large-scale losses for banks.
Over the past two weeks international gold prices have fallen by over USD$150 to a new four-month low, and currently hover at around USD$1,800 per ounce.
A trader in paper gold at a state-owned bank said that the reason for the suspension was sizeable market changes, which in tandem with the large number of trading clients could have put huge pressure on Chinese lenders in the case of any contingencies.
“When the market isn’t that great banks tend to be cautious,” said the trader. “Gold and platinum prices have risen too aggressively of late, but once the dust settles from the US election, there is the likelihood of a large-scale adjustment in gold.
“Additionally, news in relation to [COVID-19] vaccine research and development could also trigger intense fluctuations in precious metals prices.”
Wang Ke (王可), general manager of China International Futures, said that if market fluctuations increase the next move could be the suspension of trading in gold ETF’s.