Chinese Banks Alert on Precious Metal Price Volatility After Gold Sell Off

Chinese banks have recently raised alarms regarding potential risks in the precious metals market, specifically gold and silver, due to ongoing market instability. As significant sell-offs continue to impact prices, these institutions are urging investors to adopt more cautious investment strategies.

In an official notice issued on Monday, banks emphasized the necessity of preventing volatility risks as a historic drop in gold and silver prices was observed. Analysts have pointed out that while the fundamental factors supporting gold prices remain valid, a swift recovery like that seen in early 2026 is unlikely following the recent market corrections.

The magnitude of volatility within the international precious metals market has surged, leading to rapid price fluctuations and the emergence of new risks. In light of these developments, the Industrial and Commercial Bank of China has advised investors to maintain a rational approach and avoid impulsively capitalizing on price surges or panic selling, encouraging a careful assessment of individual risk tolerance.

Similarly, the Bank of China has issued reminders to clients engaged in precious metals businesses, including those involved in gold accumulation and managing precious metals accounts, to stay vigilant against market risks.

Additionally, several other financial institutions, including the Agricultural Bank of China, China Construction Bank, Postal Savings Bank of China, and the Bank of Communications, have made adjustments to their gold-related services while cautioning investors about the ongoing risks associated with trading.

On Monday afternoon, spot gold prices had fallen by approximately 3.98 percent, and silver experienced an even steeper decline, plummeting by 8.63 percent during Asian trading hours.

Senior gold analyst Zhou Yinghao from the Bank of Urumqi attributed the recent price fluctuations to sudden changes in macroeconomic expectations, a surge in speculative trading behaviors, and a technically unstable price structure, highlighting the fragility of current market conditions.

Despite the earlier surge in precious metal prices driven largely by market sentiment and leveraged trading rather than robust demand, the Relative Strength Index indicated that both gold and silver were in overbought territory prior to the recent downturn. The analyst remarked that the current price dip represents a necessary correction after a period of extreme market performance.

In a broader response to market dynamics, the Shanghai Gold Exchange announced changes to the margin rates and price limits on silver deferred contracts in an effort to stabilize market conditions.

The exchange has called on its members to enhance risk awareness, establish detailed contingency plans, and advise investors on effective risk management to promote stable market operations.

Heraeus Precious Metals, a prominent player in the global precious metals market, projected that prices would stabilize and consolidate in 2026 after a substantial rise, forecasting that gold prices would range between $3,750 and $5,000 per ounce this year.

Looking ahead, financial expert Zhao Qingming expressed optimism about potential rebounds in gold and silver prices in 2026, although he cautioned that the growth rates may not replicate the rapid increases experienced in the early days of the year, citing factors such as rising geopolitical tensions and an increase in gold holdings by global central banks.