Summary of Key Points
Recently, both domestic and international gold prices have experienced significant declines (domestically, they fell below 980 yuan per gram, a 20% decrease from the beginning of the year; internationally, they retreated by more than 20% from their historical highs), leading to a collective reduction in the expected yields of popular gold-linked structured deposits (many banks, such as Bank of Communications and China Merchants Bank, have lowered these yields, with the highest reductions being 20 basis points). The reasons include the narrowing of gold price fluctuations, which has reduced the value of options, and the low net interest margins of banks, which have compressed costs. These products guarantee the principal but depend on the range of gold prices for their returns, and they have poor liquidity; currently, the upper limits on returns are generally not high.
Detailed Analysis
#### 1. Gold Prices Have Had a Wild Ride, Now Back to “Pre-Liberation” Levels
Domestically, on June 3, the lowest price for AU9999 raw gold at the Shanghai Gold Exchange was 972.4 yuan per gram, a 20% decrease from 1243 yuan per gram at the beginning of the year (which means a reduction of 100 yuan to just 80 yuan). International gold prices have seen even more dramatic fluctuations: they soared to a record high of $5,600 per ounce at the beginning of the year and then dropped to $4,099 per ounce by the end of March. Although they have since rebounded to around $4,500, they are still more than 20% lower than their peak. In short, gold prices have cooled down significantly recently.
#### 2. Why Have the Returns on Gold-Linked Structured Deposits Suddenly Declined?
Previously, when gold prices were rising, these products were very popular. For example, a product from Bank of Communications offered a maximum yield of 3.2% and was quickly sold out; China Merchants Bank’s “Dianjin” series also had high-yield options with yields of up to 1.51%. Now, however, the yields have all been reduced: Bank of Communications has lowered the maximum yield from 3.2% to 3.0% (a reduction of 20 basis points, where 1 basis point equals 0.01%, meaning a decrease of 0.2%). The second and third tiers of returns at China Merchants Bank’s products have each been reduced by 0.13 percentage points.
There are two main reasons for this:
① These products use interest to purchase gold options (which is like betting on the direction of gold prices, similar to playing the lottery). As gold price fluctuations have decreased, the value of these options has diminished, resulting in lower potential returns for banks.
② Banks are currently experiencing thin profits (with historically low net interest margins) and do not want to spend much money on options, so they are actively reducing yields to balance their costs.
#### 3. What Exactly Are Structured Deposits?
Structured deposits guarantee the principal, but the return is not fixed. To put it simply, you deposit your money, and the principal part is treated as a regular deposit (protected by deposit insurance, up to 500,000 yuan), while the interest part is invested in derivatives (such as gold or stock indices). The returns are tiered, and the actual amount you earn depends on the performance of these derivatives.
For example, with a product from Bank of Communications, if you deposit 1 million yuan for more than 60 days:
- If the gold price exceeds 420 yuan per gram during the observation period, you will earn a return of 1.7% (about 2,980 yuan).
- If the gold price does not exceed 420 yuan but falls below 400 yuan on the last day, you will earn a return of 0.5% (about 876 yuan).
- If the gold price does not exceed 420 yuan and remains above 400 yuan on the last day, you will earn a return of 1.75% (about 3,068 yuan).
#### 4. Pros and Cons of These Products
The main advantage is that the principal is guaranteed (which makes them safer than directly investing in gold or funds, as you won’t lose your principal).
However, there are also several drawbacks:
Pros:
- Principal protection: Your initial investment is safe.
Cons:
- Returns depend on luck: You only get the higher returns if the gold price falls within a predetermined range; otherwise, you will earn the lowest possible return (about 0.5%).
- Poor liquidity: The money cannot be withdrawn early, unlike liquid investments.
- Low upper limits on returns: Even if gold prices rise significantly, the returns from these products are far lower than those from directly investing in gold ETFs or physical gold (for example, if gold prices increase by 10%, these products may only offer a return of about 2%, while gold ETFs could yield up to 10%).
#### 5. Is It Worth Buying These Products Now?
Currently, the maximum yields on these products are generally below 3%. For instance, with Bank of Communications’ product, a 1-million-yuan deposit for more than 60 days would earn a maximum of 3,000 yuan in returns. Compared to regular deposits (which offer around 1.5% at large state-owned banks), this might seem like a good deal, but the lowest return is still lower than that of regular deposits.
Should you buy them? Consider two factors:
- Whether you can accept the lock-up period (the money cannot be withdrawn early).
- Whether you believe that gold prices will remain within the predetermined range (without significant fluctuations).
If you need flexible access to your money or are looking for higher returns, regular deposits or investments with better liquidity might be a better choice.
By analyzing these factors, ordinary investors can easily understand the logic behind the decline in gold prices and the changes in the yields of structured deposits, as well as whether these products are suitable for their needs.