China's Gold Trading Halt Throws Bullion into Chaotic Markets
China's state-owned banks have halted retail trading of precious metal derivatives on the Shanghai Gold Exchange, forcing investors to shift towards physical bullion. The ban applies to popular contracts such as Au99.99, Au100g, and Au99.95, which allowed individual investors to speculate on gold prices without taking delivery of the metal.
Market observers believe this move is a deliberate policy signal from Beijing to curb speculative paper trading and redirect demand towards physical bars and coins. This could prove supportive in the long term as physical demand tends to be stickier and less prone to violent price swings amplified by paper speculation.
The immediate consequence of the ban is a liquidity squeeze in certain trading segments, but gold is also facing pressure from the bond market. The yield on 10-year US Treasuries has climbed to around 4.7 percent, making it more expensive for investors to hold non-yielding assets like gold.