(Ecns.cn) – With the prices of gold and silver continuing to set record highs, millions of Chinese are rushing to buy bullion-related products, while commercial banks have turned their focus to the "gold washing" business in the bullion market.
On September 6, gold surged to a record high of more than $1,920 an ounce on speculation that Europe's debt crisis would worsen. This kicked of a round of sometimes outrageous predictions for the next high in the bullion market.
As early as June, the Standard Chartered Bank reckoned that the price of gold would soar to $5,000 an ounce, which spooked bullion market observers at the time.
On September 3, Urs Gmuer, asset manager at Dolefin, a Swiss investment advice firm, said gold was set for a greater upward turn and that its price may reach $6,200 an ounce, when all other bull markets would see an end.
Under such a trend, those with a good nose for gold washing have included commercial banks in China.
Banks grab gold and silver
As gold and silver prices continue to rise, commercial banks doing private business in precious metals have become increasingly welcomed.
Cheng Xiangfeng, head of the Department of Gold and Foreign Exchange Markets at the Industrial Bank Co. Ltd (CIB), said that the current gold market in China is like the stock market in 2000. The volume of business in precious metals since the beginning of 2011 has reached nearly double that of the whole year in 2010. At some banks, precious metals have even overtaken their fund distribution business.
According to the latest ranking of agential gold transaction volume released by the Shanghai Gold Exchange in August 2011, half of the top 10 institutions were banks. In terms of self-operated gold sales business, eight out of the top 10 institutions were commercial banks.
The 2010 annual report from the Agricultural Bank of China showed that the total transaction volume of agential sales and self-operated business in precious metals reached 2,124 tons, including 1,167 tons of gold and 957 tons of silver. Sales and buyback of individual real gold increased to 13 tons, up 560% and 220% respectively compared to 2009. Business in precious metals brought in revenue of 303 million yuan ($46.84 million), up by 328% from 2009.
Apart from state-owned banks, shareholding banks performed even better. Taking the CIB as an example, its revenue from agential sales of precious metals reached 232.57 billion yuan ($35.95 billion) in 2010, up 152.51% year on year, ranking it first on the list last year. In the first half of 2011, the sales revenue of the CIB increased 88% compared to the same period in 2010.
