Shanghai Gold Exchange Caps Transaction Size

Shanghai: Late last week, the Shanghai Gold Exchange (SGE), now the world’s largest exchange for physical trading in bullion, announced a cap on the amount of gold that can be traded in one single transaction. The order, which became effective on January 1, 2017, limits the size of one single transaction in pure gold to 500 kg, down from the 1,000 kg that was permitted earlier.

There was no official explanation for the move, but media reports quote analysts as saying that the aim was to reduce the impact that institutional investors, such as banks and hedge funds, could have on prices.

However, there is no ban on the amount of metal that can be traded in a day, the reports added. But, transaction costs for those dealing in large amounts would increase.

The move is in sync with the steps taken by various other commodity exchanges in the country that have hiked transaction fees and margins and / or placed limits on trading positions in an effort to keep prices in check.

Reports state that the drop in international gold prices has led to a resurgence in demand, with volumes in November reaching 3.4 million kg, the highest total for one single month in 2016.

Analysts believe that the prices of the yellow metal could drop further in 2017, given that the US Fed has indicated the possibility of up to three rate increases during the year.