(Yicai) Jan. 9 -- With international gold prices continuing to surge, banks have accelerated the launch of gold-linked deposits, which have become very popular among Chinese investors.

DBS Treasures, backed by Development Bank of Singapore, debuted a GLD with a 12-month term and annualized return on investment of 1.5 percent to 4 percent in China on Jan. 1. The minimum subscription amount is USD10,000.

GLDs are investment products combining deposits with derivatives that tie payouts to gold’s price, which offer potentially higher returns but also greater risks. They usually have terms ranging from three to 12 months and minimum deposit thresholds from CNY10,000 (USD1,430) to USD10,000.

HSBC China launched a series of deposits linked to gold mining companies, such as Zijin Mining, Newmont, and Barrick Mining, rather than directly to gold. They have a minimum investment amount of USD20,000, a term of three years, and an annualized coupon rate of 0.1 percent to 4.5 percent.

China Merchants Bank has issued 15 GLD products this year alone, with terms ranging from seven to 90 days, expected annualized interest rates at maturity of 1 percent to 1.78 percent, and deposit amounts of CNY10,000 to CNY300,000 (USD42,940).

“Customer demand for GLDs has significantly increased recently,” the manager of a branch of a joint-stock bank in China told Yicai. “Products with maturities of three months to one year have been the best sellers, with over 60 percent of customers receiving medium-to-high returns upon maturity.”

Amid surging international gold prices, GLDs have created an asymmetric return-risk option for investors because GLDs’ principal is protected by the deposit insurance system, and their potential returns are higher as they are linked to gold prices, according to industry insiders.

Meanwhile, banks have intensified the risk management of their gold business with innovative products. Many of them recently announced they will raise the entry standard for the gold accumulation business from conservative to balanced investors.

Lenders classify investors’ risk tolerance into five levels, which are conservative, prudent, balanced, growth-oriented, and aggressive, from low to high risk tolerance.

The gold accumulation business is a financial service offered by banks, allowing investors to build gold holdings over time via monthly purchases that are directly deducted from their accounts. When they want, investors can then withdraw either physical gold or redeem the money.

Banks are making adjustments to their bank accumulation business to re-evaluate and weigh the risk characteristics of gold products. Affected by bigger fluctuations of gold prices, the risk attribute of gold accumulation products has undergone significant changes, so its risk level has gradually been approaching that of medium-risk equity assets.

The international gold market will remain in a dynamic equilibrium stage this year, influenced by multiple forces, industry insiders predicted. Structural demand from investors and central banks may support gold prices to rise as geopolitical economic uncertainties remain high, and the US dollar is likely to stay weak. However, global economic recovery, changes in the interest rate cycle, and the US dollar’s phased rebound may put pressure on gold prices.

Editor: Futura Costaglione