(Yicai) June 25 -- Several Chinese banks, including Industrial and Commercial Bank of China, have begun to limit their agency precious metals trading business because of the great fluctuations in gold prices.

ICBC said yesterday it will stop handling personal bidding services for precious metals trading in the Shanghai Gold Exchange from July 24. Postal Savings Bank of China, Ping An Bank, and other lenders also announced the suspension of similar precious metals services. Others, such as Bank of China, China Guangfa Bank, and Huaxia Bank, increased the margin ratio for their deferred precious metals services in the SGE.

In recent years, banks have significantly reduced their agency precious metals trading business in the SGE under regulatory guidance, with the adjustments primarily affecting existing clients. Industry insiders told Yicai that individual investors will likely shift towards standardized low-leverage products in the precious metals market in the future.

"Agency precious metals trading in the SGE is a leveraged derivative business with relatively high risks, which has previously led to multiple disputes between individual investors and banks," Dong Ximiao, chief researcher at China Merchants Bank-China Unicom Consumption Finance, told Yicai. "ICBC's decision to cease this business is an adjustment made by the bank, taking into account factors such as risk control, regulatory compliance, and investor protection."

With great progress in the negotiations between the United States and Iran, international gold prices recently rebounded from their lows. However, the hawkish expectations from the Federal Reserve have led to a sharp decline in the London spot gold price.

On June 23, the price of spot gold in London briefly fell below the USD4,100 mark, down about 27 percent from this year's peak. On the same day, the price of the AU99.99 gold on the SGE closed at CNY898.93 (USD132) per gram, a decline of over 28 percent from the peak of CNY1,256 (USD184) per gram earlier this year.

As a result, major international banks have lowered their expectations. For example, Goldman Sachs cut its gold price target for the end of the year by USD500 to USD4,900 per ounce, citing bleak prospects for the Fed to lower interest rates this year. The firm also warned that if the Fed increases interest rates this year, the gold price could drop to USD4,400 per ounce.

Gold is set to become an asset with a more diverse and complex set of pricing factors, Cheng Qiang, chief economist and director at the research institute of Topsperity Securities, told Yicai. The precious metal's price movements will be predominantly influenced by financial, monetary, and safe-haven attributes, which will alternate in dominance during different phases, he added.

"The long-term logic of gold remains intact," Cheng said, adding that after a phase of adjustment since March, prices have partially released pressure. "Once the London gold fell below USD4,098 per ounce, it entered a range that warrants attention.

"Moving forward, it is essential to consider geopolitical situations and expectations for interest rate cuts," he noted.

Editor: Futura Costaglione