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With international gold prices continuing their upward trend, financial institutions have been quick to roll out gold-linked deposit products, which have gained considerable popularity among Chinese investors.
A bank backed by a major development bank introduced a gold-linked deposit with a 12-month duration and an annualized return ranging from 1.5% to 4% in China on January 1. The minimum required investment is $10,000.
These gold-linked deposits are investment products that combine traditional deposits with derivatives, where payouts are tied to gold’s price, offering the potential for higher returns along with increased risks. Typically, their terms range from three to twelve months, with minimum deposit amounts spanning from 10,000 CNY (approximately $1,430) to $10,000 USD.
Another bank launched a series of deposits linked not directly to gold but to gold mining companies, including Zijin Mining, Newmont, and Barrick Gold. These investments have a minimum deposit of $20,000, a three-year term, and an annualized interest rate between 0.1% and 4.5%.
One major bank has issued 15 gold-linked deposit products this year alone, with durations from seven to 90 days. The expected annualized interest rates at maturity range from 1% to 1.78%, and deposit amounts vary from 10,000 CNY to 300,000 CNY (around $42,940).
A branch manager at a joint-stock bank mentioned, “Customer demand for gold-linked deposits has grown significantly recently. Products with three-month to one-year maturity periods are the most popular, with over 60% of investors seeing moderate to high returns upon maturity.”
As international gold prices surge, these gold-linked deposits offer an asymmetric risk-reward profile. Since the principal is protected by deposit insurance, and payouts are connected to gold prices, they present higher potential returns with manageable risk, according to industry experts.
Meanwhile, banks are stepping up their risk management strategies in the gold sector by introducing innovative products. Recently, many announced plans to tighten entry standards for gold accumulation accounts, shifting from a conservative to a more balanced investor profile.
Financial institutions categorize investors’ risk tolerance into five levels: conservative, prudent, balanced, growth-oriented, and aggressive, from the lowest to the highest risk appetite.
Gold accumulation accounts are services that enable clients to gradually add to their gold holdings through monthly purchases directly debited from their accounts. Investors can choose to withdraw physical gold or redeem their investments when desired.
Banks are reassessing and adjusting the risk profiles of these products in response to increased volatility in gold prices. As gold price fluctuations have intensified, the risk level of gold accumulation accounts is gradually approaching that of medium-risk equities.
Experts predict that the international gold market will remain in a state of dynamic equilibrium this year, influenced by several factors. Structural demand from investors and central banks may support higher gold prices amid persistent geopolitical and economic uncertainties, along with a relatively weak US dollar. Conversely, a sustained global economic recovery, shifts in interest rate policies, and a temporary rebound in the US dollar could exert downward pressure on gold prices.
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