BEIJING Dec 28 Shanghai Gold Exchange, the
world's biggest physical bullion exchange, said on Wednesday it
will curb the amount of gold investors can trade at one time, a
move analysts said would limit institutional investors'
influence on prices.
The exchange said in a statement it will halve its limit on
transactions to 500 kg on some spot gold contracts starting Jan.
1. It did not give a reason for the move and the exchange did
not answer calls seeking comment.
The new limit, which would be worth more than $20 million
based on current prices, suggests the move is targeted at
institutional investors, such as banks and hedge funds.
The move does not affect the amount traders can sell or buy
in any one day, but it would likely force traders to carry out
big transactions in multiple moves, reducing the potential for
"fat finger" erroneous trades or preventing big investors from
carrying out rapid-fire buying or selling to influence prices.
It may also drive up the transactions costs.
Turnover in the exchange has soared as Chinese retail
investors' appetite for gold as a safe-haven investment has
increased. In November, volume hit 3.4 million kg, the highest
monthly total so far this year.
International prices are languishing close to their lowest
for the year as institutional investors have sold the yellow
metal in anticipation that the U.S. Federal Reserve will opt for
more interest rate hikes next year. The Fed indicated this after
raising rates on Dec. 14.
Higher interest rates discourage the buying of
non-interest-paying bullion, which is priced in dollars.
The measures "will prevent a big amount of capital flowing
out of the market at one time, and therefore prevent the gold
price going down sharply in a short period of time," Xie
Qingpeng, gold analyst at Guotai Jun'an futures.
Other major commodity exchanges in China this year have
hiked transactions fees and margins as well as cut position
limits on everything from rubber to coal to curtail rising
Beijing has blamed speculation for the soaring markets.
(Reporting by Josephine Mason and Muyu Xu; Editing by Christian