In the context of unprecedentedly strong world gold prices in recent months, many Chinese individual investors have poured money into the online metal trading platform JWR, hoping to take advantage of the market's hot momentum.
However, as spot gold prices continued to escalate in recent weeks, a wave of customers simultaneously withdrawing money to take profits pushed JWR into a liquidity crisis, making it unable to meet increasing refund requests.
Last weekend, hundreds of investors gathered in front of JWR's headquarters in Shenzhen to demand a refund, forcing police to intervene to maintain order.
On January 29, the La Ho District (Luohu) government of Shenzhen announced that it had established a working group to investigate the unusual business activities of JWR.
According to estimates compiled by investors and quoted by financial news agency Yicai, the amount of money JWR has not paid to customers may exceed 10 billion yuan (1.4 billion USD).
This incident has shaken confidence in the Shuibei gold trading area - which is considered the "heart" of the Chinese gold market - while exposing the increasing risks that individual investors are facing when flocking to unlicensed metal trading platforms, while gold and silver prices maintain a prolonged upward trend.
According to initial analysis, JWR's liquidity crisis is related to the "pre-valuation" trading model.
With this model, the platform attracts a large number of individual investors through social networks, promoting gold and silver trading products with low participation thresholds but high leverage.
Unlike transactions through managed precious metal exchanges, "pre-valuation" transactions do not go through a public clearing payment system. Instead, the platform negotiates separately with investors about future gold and silver prices.
When precious metal prices increase rapidly and investors simultaneously withdraw money, businesses are forced to mobilize large amounts of capital in a short time or arrange for physical delivery. If risk prevention is not adequate or necessary capital reserves are not maintained, the risk of insolvency will quickly erupt.
In recent months, Chinese authorities have continuously warned individual investors about the risks of chasing the gold price "fever".
Previously, in Shenzhen, there were a number of similar cases related to online precious metal trading platforms using the "pre-valuation" model.
In October last year, the Shenzhen Gold and Jewelry Association issued a risk warning, stating that some local raw gold suppliers, under the guise of gold trading, have actually organized "gold price betting without physical delivery" on an online platform, suspected of being illegal gambling.
World gold prices closed last week trading at 4,893.2 USD/ounce, down 434.45 USD, equivalent to a decrease of 8.15%.
Regarding domestic gold prices in the Vietnamese market, as of 9:30 am on February 1st, SJC gold bar prices traded at 169 - 172 million VND/tael (buying - selling). Bao Tin Minh Chau 9999 gold ring prices traded at 169 - 172 million VND/tael (buying - selling).
