Since the beginning of 2024, gold prices have surged nearly 60%, quietly impacting the previously marginalized precious metals business in the banking industry.
Today’s banks have become new &#34;gold mining sanctuaries&#34; due to advantages such as reasonable prices, a wide range of products, and credit endorsements. The frequent sellouts of gold bars and gold jewelry by major banks after the Spring Festival of the Year of the Snake are the best examples.
According to Xinfeng, the bank's gold business can be subdivided into two main categories: customer-facing and proprietary.
The representative of customer-facing business is the currently popular physical gold and accumulated gold.
In this type of business, banks conduct sales, repurchase, and other services aimed at retail, corporate clients, or institutional investors, with the goal of earning fees and commissions;
Proprietary business mainly involves banks directly participating in the gold market (LBMA, Shanghai Gold Exchange, etc.), including futures, options, and other derivative products, aiming to profit from market fluctuations and hedge risks.
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The simultaneous rise in both price and volume of gold trading has driven a strong growth in the scale of precious metal assets in the banking industry after hitting a low point. Among the 15 listed banks that have disclosed data for 2024, the year-end scale of precious metals has increased by over 70% compared to the beginning of the year, reaching the highest growth rate since 2018;
On the other hand, the high volatility in gold prices is also testing banks' risk and expectation management capabilities.
<h2>&#34;Gold Rush&#34; Surge</h2>
The surge in gold prices has become a development opportunity for banks in customer-facing services.
<h2>For example, the hot-selling gold repurchase service after the Spring Festival of the Year of the Snake is a representative action for banks to improve their retail gold business.</h2>
Since February 2025, nearly 20 banks, including Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), Bank of China (BOC), China Construction Bank (CCB), Bank of Communications (BoCom), and Postal Savings Bank of China, have launched gold repurchase services, providing repurchase and monetization channels for physical gold holders.
Due to the technical barriers and equipment costs associated with quality assessment, this business is still operating among national commercial banks and leading city commercial banks, and most banks limit repurchase to gold sold by their own institutions.
For example, ABC has opened nearly 3,000 gold repurchase outlets nationwide, covering gold products sold by Agricultural Bank equipped with repurchase certificates;
BOC, CCB, and Postal Savings Bank also support repurchase of their own gold products.
ICBC has expanded its scope to include more peers, involving 14 commercial banks and 2 gold enterprises, and has promoted the repurchase process through branches in multiple locations; currently, the repurchase price difference for ICBC brand gold is 4 yuan/gram, while for non-ICBC gold it is 10 yuan/gram.
On one side is the opening of monetization channels, while on the other side, facing the hot sales of gold, banks continue to ramp up efforts on the sales front.
After the holiday, major banks like ICBC, CCB, and BOC launched new products such as &#34;2025 Year of the Snake Gold Banknotes&#34; and &#34;Gold New Year Money,&#34; expanding styles beyond traditional zodiac gold coins and banknotes to include pendants, bracelets, rings, and fortune beads;
Zheshang Bank has partnered with JD Finance to launch &#34;Dog Head Gold&#34; physical gold, opening up sales channels.
As the prices of gold bars and jewelry from major banks are generally lower than those in branded gold stores, and the repurchase prices are higher than the market, it has become commonplace for &#34;hot-selling&#34; products to sell out when gold prices rise
Beyond retail, banks are also actively expanding their gold-related businesses in the corporate sector.
For example, the approval for insurance funds to enter the gold market at the beginning of the year is providing banks with more opportunities for custody, pricing, and other services.
In February of this year, after 10 insurance companies were allowed to invest in spot gold, forward contracts, and related derivatives at the Shanghai Gold Exchange, companies such as PICC, China Life, Taikang Life, and Ping An have all engaged in gold trading.
In response, both Bank of China and Shanghai Pudong Development Bank stated that they have provided trading quotes, custody, and margin deposit banking services for the first batch of pilot insurance companies.
<h2>How Much is the Proprietary Exposure?</h2>
Compared to the highly popular retail customer segment, the banks' proprietary gold business may be relatively niche.
Generally speaking, banks participate directly in gold market products such as futures and options primarily for risk hedging, and the overall risk under trading purposes is relatively controllable for two main reasons:
First, the accounts that previously participated in gold (paper gold) and other derivative businesses with free funds have been strictly restricted.
For instance, several years ago, the paper gold business, although not involving physical gold delivery, required the custodian bank to adjust quotes based on international gold price fluctuations and to conduct buy hedging in the proprietary account to guard against potential price risks.
If gold prices fluctuate significantly, prompting investors to buy or sell in large volumes, and the bank's operations are not timely, potential risk exposure may arise.
However, several years ago, such businesses were already strictly limited, so the related risk exposure has indeed contracted.
&#34;After 2022, nominally, paper gold is no longer available.&#34; Zhao Guang (pseudonym) from a state-owned bank's precious metals business department told Xinfeng, &#34;It can be considered collateral damage from the oil treasure incident back then, and regulators have suspended new positions.&#34;
Xinfeng's inquiry into several major banks' apps found that related businesses have indeed suspended contracts.
Another customer manager from a state-owned bank confirmed to Xinfeng that the bank no longer offers paper gold sales, and the related products now rely on physical gold, with regular fixed-amount investments and the option to withdraw physical gold.
Regarding the current gold business, Zhao Guang believes that &#34;theoretically, there is no risk exposure,&#34; and stated that if customers buy physical gold or accumulated gold, the bank can conduct real-time flat trading through the Shanghai Gold Exchange or overseas markets.
Second, more services are focused on arbitrage trading, with little involvement in direct investment.
Compared to direct investment, arbitrage has stricter requirements for market access, technical tools, and capital scale, requiring precise control over trading rules and price difference calculations, as well as quick execution capabilities;
Therefore, successful gold arbitrage can accurately calculate returns, with a lower probability of loss.
Zhao Guang stated, &#34;Currently, regulation on new business forms of gold is very strict, and banks find it difficult to make breakthroughs in this area in the short term.&#34;
However, according to Xinfeng's understanding, under performance pressure, some joint-stock banks have adopted more aggressive trading strategies in their proprietary gold accounts, which may expose certain risk exposures.
A precious metals insider from a state-owned bank told Xinfeng, &#34;Some banks take unilateral exposure during proprietary trading, which carries significant risk.&#34;
&#34;This situation is more common among joint-stock banks. State-owned banks focus on risk management, while small and medium-sized banks cannot obtain business licenses, and larger joint-stock banks tend to adopt more aggressive strategies.&#34; the insider pointed out
This also means that under volatility, the proprietary business of such banks is facing greater challenges.
Some institutions that had previously made profits are now signaling a &#34;shift from long to short.&#34;
For example, for Beijing Bank, which had gained returns from gold investments in 2024, its financial market director Liu Suqin revealed that the company's investment in gold is shifting from &#34;buying low&#34; to &#34;selling high.&#34;
<h2>Significant Expansion on the Asset Side</h2>
The increase in gold trading has had a tangible impact on the banks' asset side.
Currently, among the 15 listed banks that have disclosed data for 2024, the total scale of precious metals at the end of the year reached 770.562 billion yuan, an increase of 71.17% compared to the beginning of the year;
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The banking industry is generally optimistic about gold demand, showing a trend of &#34;aggressively accumulating gold.&#34;
Some banks, under the influence of gold accumulation and other businesses, are further expanding their on-balance-sheet proprietary volumes for hedging.
Among the 15 comparable listed banks, 13 have shown an increasing trend in asset scale;
If we exclude the impact of rising gold prices (approximately 26%), about 60% of banks have seen an increase in gold reserves.
State-owned large banks have generally shown significant growth.
The four major banks—Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, and Bank of China—have all seen substantial increases in precious metals scale, with CCB and ABC doubling their assets;
Although China Merchants Bank, known as the &#34;king of retail&#34; among joint-stock banks, has relatively low overall precious metals assets, it also made significant purchases of gold in 2024, with an increase of over 300%;
Beijing Bank, the only city commercial bank with a scale exceeding 4 trillion yuan, also saw a precious metals increase of 81.37%.
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The details of many banks' &#34;involvement in gold&#34; are reflected in their annual reports.
For example, Bank of China reported a 40.75% year-on-year increase in precious metals sales revenue to 21.44 billion yuan;
China Construction Bank stated that it actively participates in market construction by leveraging its full licensing advantages in the gold market, extending the trading time for gold accumulation, and independently developing intelligent systems to analyze market conditions and reporting data in real-time, ensuring accurate and compliant delivery.
Agricultural Bank of China relies on precious metals leasing to meet the gold demand of enterprises in the precious metals industry chain, strengthening its service capabilities for upstream and downstream enterprises in the precious metals industry chain;
Beijing Bank focuses on the precious metals product sector, promoting new gold accumulation businesses.
In contrast, smaller banks like Qingdao Bank and Ningbo Bank saw their precious metals assets shrink by 98.91% and 23.89%, respectively;
Among joint-stock banks, Everbright Bank, Minsheng Bank, CITIC Bank, and Industrial Bank also had precious metals increases smaller than the rise in gold prices, suggesting a downward trend in reserves.
However, the year-end decrease in on-balance-sheet assets does not imply a lack of gold sales; it may also be due to not timely closing positions after hot sales.
Qingdao Bank stated that the significant reduction of 98.91% in precious metals assets was caused by inventory sales
In the same year, the bank's precious metals sales drove &#34;other business income&#34; to grow nearly 50 times, while &#34;other business cost expenditures&#34; increased over 370 times. The reduction in precious metals impairment led to a decline of over 90% in &#34;other asset impairment losses.&#34;
Qingdao Bank stated that it has launched services such as periodic appointment transfers and online business loans, optimizing the online purchasing process for precious metals.
<h2>Risk Control and Future</h2>
The rapid rise in gold prices and the buying frenzy also pose challenges to banks' risk management.
Continuous adjustments to the accumulation gold business have become the banks' response.
Since 2024, Agricultural Bank of China, Bank of China, China Construction Bank, China Merchants Bank, and CITIC Bank have successively taken measures to raise the minimum purchase amount for accumulation gold and lower the corresponding interest rates.
These measures aim to some extent to mediate the pace and scale of business, avoiding management risks related to interest rates and liquidity that may arise from fluctuations in gold prices.
The volatility risk beneath the rapid surge in gold prices indeed follows closely.
On April 23, the spot gold price &#34;plummeted,&#34; dropping over 4% in one day from a historical high of $3,500 per ounce;
After strengthening the next morning, it fell again, closing at $3,262.95 per ounce by 5 PM.
Dong Ximiao, deputy director of the Shanghai Financial and Development Laboratory, told Xin Feng that for a period of time in the future, gold will still have strong attributes as a safe-haven asset. However, after international gold prices hit new highs repeatedly, market volatility will also intensify, with the possibility of sharp declines in the short term.
Since the beginning of the year, banks such as ICBC, CCB, and CITIC have issued risk warnings.
For example, ICBC advises customers to enhance their risk awareness and pay more attention to the precious metals market and price trends; CCB suggests timely monitoring of positions and changes in margin balances for rational investment.
While ensuring risk control, the industry still looks forward to the long-term prospects of gold business.
Zhao Wenjian, a senior expert in the precious metals business department of ICBC, believes that the weak correlation between gold and other assets should be leveraged to enrich &#34;gold+&#34; combination products such as gold + fixed income, gold + equity, and gold + interest rate/exchange rate;
Zhao Wenjian believes that recycling services should be expanded, combining physical gold with blockchain to achieve traceable sources and transparent transaction processes, and optimizing transaction processes through AI technology to enhance operational efficiency and risk management capabilities.
The Investment Strategy Research Center of Bank of China points out that under the trend of de-dollarization and expectations of a dollar reset, the global credit benchmark role of gold is strengthened, and it should be elevated from a portfolio asset to a strategic major asset.
&#34;In the foreseeable second quarter, the logic supporting the gold bull market does not show signs of a complete reversal.&#34;
This means that banks may give more preference to gold-related products in the future.
Even if product forms are still difficult to break through in the short term, as banks continue to improve risk management and expectation management for gold-related products, the market may explore more new products;
Using &#34;gold+&#34; as an opportunity to reach customers may be a new blue ocean for banks struggling in the current environment of narrowing interest margins and shrinking non-interest income

- The surge in gold prices by nearly 60% in 2024 has revitalized banks' precious metals businesses, making them attractive for retail and institutional clients.  
- Major banks have expanded their gold offerings, including buyback services and new product lines, while also facing challenges in risk management due to market volatility.  
- As banks adapt to these changes, they are expected to enhance their gold-related services and explore innovative products, positioning gold as a strategic asset amid fluctuating market conditions.

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