How Banks and Insurance Companies Respond to the "Surge" in Gold Prices at the Beginning of the Year

In 2024, the gold price surged by 20%, continuing its "crazy rise."

On February 7, the international gold price reached a historical high of USD 2883.16 per ounce; the next day, it maintained a high level, peaking at USD 2910.60 per ounce.

As of 6:21 PM Beijing time on February 10, the London gold quote was USD 2903.19 per ounce, with a nearly 7.95% increase over the past month.

Driven by international gold prices, the Shanghai Gold Exchange quoted gold Au9999 at 679.8 yuan per gram during the same period, up 7.23% in the past month;

According to Tencent Licaitong, the gold quotes for Chow Tai Fook, Lao Feng Xiang, and Chow Sang Sang were 873 yuan per gram, 869 yuan per gram, and 873 yuan per gram, respectively, with daily increases of over 0.23%.

Amid the continuously hot market, many financial institutions have also set their sights on this "delicacy."

The Threshold for Gold Accumulation is Raised Again

Xinfeng has sorted through public information and found that several banks have made adjustments to gold investment products after the New Year.

First, they adjusted the purchase conditions for gold accumulation products.

Starting from February 10, the minimum purchase amount for the Bank of China’s gold accumulation products will be raised from 650 yuan to 700 yuan, while the additional purchase amount remains unchanged at multiples of 200 yuan.

This is the first bank to announce an increase in the minimum purchase amount for gold accumulation products in 2025; earlier, Agricultural Bank of China, China Construction Bank, and China Merchants Bank had frequently adjusted the minimum purchase amounts for gold accumulation in 2024.

For example, China Construction Bank raised the minimum amount for its gold accumulation business twice in 2024, increasing it from 500 yuan to 700 yuan.

In September of the same year, Agricultural Bank of China announced that the purchase threshold for its gold accumulation product No. 2 would be adjusted to fluctuate with gold prices, while the trading increment remained unchanged at 10 yuan;

Ningbo Bank, Postal Savings Bank, Industrial and Commercial Bank of China, China Merchants Bank, and Ping An Bank also adjusted their gold accumulation purchase thresholds in 2024, with increases ranging from 100 yuan to 120 yuan.

From the direction of the adjustments, raising the purchase threshold can help banks control the scale of business to a certain extent, avoiding significant risks and management pressure caused by excessive small investors entering and exiting during large fluctuations in gold prices.

Second, they adjusted the interest rates related to gold account services.

Starting from February 12, China Merchants Bank will adjust the interest rates related to gold account services, with the annualized interest rates for gold account demand deposits, three-month, six-month, and nine-month products all being lowered compared to before.

Compared to the current rates, the demand deposit rate is expected to be lowered by 0.09%, the three-month rate by 0.2%, and the six-month, nine-month, and one-year rates by 0.3%.

At the same time, starting from February 17, China Merchants Bank will raise the trading spreads for buying and selling gold accounts, stating, "Recently, gold prices have fluctuated significantly; investors should pay attention to market conditions and invest rationally. The trading spreads for account buying and selling will be adjusted based on market conditions." Previously, a research institution under Industrial Bank pointed out that both short-term gold valuations and technical indicators are currently overbought.

"When the quarterly rolling increase in gold prices reaches 10%, 15%, or 20%, a correction usually occurs," the institution stated. "These three increases correspond to the low points of gold prices in mid-November 2024, should gold prices rise to USD 2810, 2937, and 3064 per ounce by mid-February."

The latest quotes show that London gold has reached USD 2903.19 per ounce, rapidly approaching the USD 2937 per ounce corresponding to a 15% increase.

"Currently, the price of gold is at a high level, and investments need to be more cautious," said a client manager from China Merchants Bank.

After 10 insurance companies received the "entry ticket"

In the long term, there may still be continuous inflows of funds into the gold market in China.

Analysts pointed out that the central bank has returned to the "gold purchasing path," and barring any unexpected factors, it is unlikely to stop in the short term. "Referring to the proportion of gold assets in the central bank's foreign exchange reserves, there may still be motivation to purchase gold at the appropriate time in the future."

Latest data from the central bank shows that China's gold reserves reached 73.45 million ounces at the end of January, marking the third consecutive month of increasing gold holdings.

According to the China Gold Association, the central bank accumulated an additional 44.17 tons of gold in 2024, and by the end of 2024, China's gold reserves are expected to reach 2279.57 tons, ranking sixth in the world.

As a medium to long-term "patient capital," insurance funds may also gradually participate in gold investments in the future.

Currently, the National Financial Regulatory Administration has issued a notice on the pilot program for insurance funds to invest in gold (hereinafter referred to as the "Notice"), allowing 10 pilot insurance companies to invest in spot gold, deferred contracts, and related derivatives on the Shanghai Gold Exchange for medium to long-term asset allocation purposes.

The "Notice" requires that pilot insurance companies invest in gold using flexible methods such as bulk trading, inquiry trading, and competitive bidding to build positions in stages, avoiding market shocks caused by abnormal trading behavior;

It also stipulates that the investment cap for this round of pilot projects is 1% of the total assets under management of the insurance companies.

Based on estimates of the scale of the 10 pilot insurance companies, the upper limit of insurance funds brought by the "Notice" should be around 200 billion yuan, equivalent to about 8% of the global stock of spot gold ETFs.

In the context of a continuing "asset shortage," the "relaxation" of gold investment for insurance companies can be seen as a "much-needed relief."

Experts pointed out that gold, as a long-term asset, has a certain degree of matching with the investment allocation needs of insurance funds, effectively diversifying the investment portfolio risks of insurance funds.

As early as 2018, Cao Deyun, vice president of the China Insurance Asset Management Association, pointed out that insurance companies, as important institutional investors and long-term investors in the financial market, have a strong interest in gold asset allocation.

From overseas experience, large insurance companies in the United States, Europe, and Japan typically include gold in their investment portfolios to hedge against inflation and interest rate risks.

Even in an environment where insurance funds' allocation to gold has not been "relaxed," some insurance companies have participated in the market through gold-related stocks or funds For example, in 2021, PICC Asset Management established the industry's first asset management product that invests in gold index securities.

At that time, PICC Asset Management stated, "The demand for gold investment is significant, and the market potential is enormous."

By the end of 2024, Cao Deyun publicly stated again, "The investment in gold by insurance funds has become a consensus and expectation both inside and outside the industry, and it is expected to become an important institutional investor and participant in the gold market in the near future."

A person from a large insurance company revealed, "Many leading insurance funds have always wanted to allocate gold, but they weren't allowed before; now the issue is that the price is too high."

"The property of gold as a monetary anchor is very friendly to insurance funds," the person said. "In the long term, insurance funds may still be inclined to allocate when the opportunity arises. If a consensus is reached that gold prices will continue to rise in the long term, institutions may intervene in a manner similar to regular investment."

The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at one's own risk