Following the sudden demise of a major gold trading platform in the southern Chinese city of Shenzhen, another retail-focused operator has suffered a run, stoking fears of contagion in China’s private market for the precious metal.
The platform, Ydd007, is the latest to face trouble. On Sunday, it told investors that it had experienced three “severe runs” in recent days amid mounting industry panic. It also acknowledged a significant funding shortfall, according to Chengdu.cn, part of the Chengdu municipal government’s media office.
Since Saturday, investors from Guizhou, Jiangxi and other provinces have travelled to Ydd007’s office in Shenzhen’s Shuibei – widely regarded as the heart of China’s private gold trade – to demand immediate payouts, the report said. The incident came right after a redemption crisis at Shuibei’s JWR, an online metals trading platform.
The turmoil coincided with global volatility in gold and silver prices. Both suffered a historic sell-off last week, with the gold price plunging nearly 10 per cent on Friday – the biggest single-day decline in decades – before partially recovering on Tuesday.
On Wednesday, authorities in Shenzhen’s Luohu district announced that a task force would investigate abnormal business operations at JWR, where unpaid funds could exceed 10 billion yuan (US$1.4 billion), based on investor estimates reported by mainland media outlets.
Shuibei is home to a large share of the country’s wholesale, processing and pricing activity for gold, and its stability has long been regarded as a barometer for the domestic industry.
Ydd007’s trading model closely mirrors JWR’s, offering high-leverage “virtual gold” trades with low margin deposits. The company stated that it had previously managed risks by hedging on other platforms, including JWR, but faced severe cash flow pressure after those channels were blocked, Chengdu.cn reported.
Similar platforms operate in a grey area between physical gold trading and financial derivatives, fuelling concerns on social media. Several privately run online platforms have been suspended since JWR’s crisis, Chinese media outlet Jiemian reported.
“It’s far more than just these two platforms – many people on social media have shared similar experiences,” one user posted on RedNote, adding that gold bought on another platform in October last year was also facing withdrawal difficulties.
Legal experts cautioned that the impact of such risks on households should not be underestimated. “Recent sharp declines in precious metals like gold have affected numerous retail investors and their families, with some even facing debt pressures,” said Guangzhou-based lawyer Deng Ping.
Chinese authorities had previously warned retail investors about the risks of chasing the recent gold rally.
In October, the Shenzhen Gold and Jewellery Association issued an alert, noting that several local suppliers – posing as legitimate gold traders – were in fact running “non-physical gold betting” through online platforms.
Authorities suspected these operations amounted to illegal gambling, according to the notice.