Chinese Banks Abandon Leveraged Precious Metals Trading

At least a dozen Chinese banks have announced plans to end leveraged precious metals futures contracts, citing concerns over risk and regulatory pressure. The move could increase demand for physical metal in China, the world's largest gold market.

The Shanghai Gold Exchange (SGE) appears to be phasing out unleveraged spot gold futures contracts for retail customers. Chinese banks have allowed leveraged precious metals trading for more than two decades, but borrowing money to speculate on gold and silver comes with a high level of risk.

Analyst Xu Ying called it 'an inevitable shift' and predicted every major bank will eventually exit the business. The SGE general sets margin requirements, allowing retail customers to post as little as one-sixth of the contract value.