Authorities in the Chinese gold retail hub of Shenzhen issued a stark warning against illegal activities, following a string of high profile scandals emerging from a wave of speculation into precious metals.
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Multiple agencies in the southern Chinese city posted a joint statement on Friday urging an end to “illegal gold trading activities,” ranging from apps offering leverage to retail investors, online live streams promoting bullion sales, and the impersonation of a Shanghai Gold Exchange member.
Frenetic Chinese buying- from individual investors to large equity funds venturing into commodities- helped push gold and silver to record highs through January, before a historic rout at the end of the month. Still, retail demand has remained strong, traders say.
Along with record inflows into Chinese gold ETFs and overheating demand for the country’s only pure-play silver fund, much of the action has been centred in the Shuibei jewellery district of Shenzhen, a former fishing village that’s become the epicentre of China’s gold market.
Phrases like “gold prices will soar” or “make big money by buying gold” will now be strictly prohibited, along with adulterating materials to resemble pure gold or other precious materials, the Shenzhen authorities said.
The retail fervour for precious metals has already led to chaotic scenes in the city. In one instance, customers in Shenzhen who bought gold via one company’s popular online platform ended up in protests and scuffles with police, after being unable to recover their funds.
The platform Jie Wo Rui was just one of hundreds of small and medium-sized investment vehicles across China that used social media to entice retail investors to participate in gold’s bull run with the promise of quick profits. The protest prompted local authorities to appoint a special task force to monitor the platform’s operations.
Silver demand has been similarly fierce. Supply pressures in China pushed front-month prices on the Shanghai Futures Exchange well above those for longer-dated contracts, while stockpiles at warehouses linked to the futures market and the Shanghai Gold Exchange recently fell to levels last seen more than a decade ago.
Amid the tightness in silver, SHFE adjusted its rules to prevent certain businesses from carrying their silver futures contracts through to delivery unless they have a specific hedging quota, a move that could stem outflows from the exchange’s warehouses.
FAQs
1. Why are Chinese investors buying so much gold?
Due to economic uncertainty, weak property markets, and global tensions, investors see gold as a safe-haven asset.
2. What caused the retail hub crackdown in China?
Fraud cases, fake investment products, and delayed payments forced authorities to take strict action.
3. Will this affect global gold prices?
Yes, since China is a major gold consumer, any slowdown or change in demand can impact global prices.
4. Is gold still a safe investment?
Gold is considered a safe asset during uncertainty, but investors must use trusted and regulated platforms.
5. What should retail investors check before investing in gold?
Check platform credibility, regulatory approvals, fee structure, and avoid schemes promising guaranteed returns.
Disclaimer
This article is intended for educational purposes only. The views and opinions expressed are those of individual analysts or brokerage firms and do not represent the views of GoldSilverReports.com. Investors are strongly advised to consult certified financial experts before making any investment or trading decisions.
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