Gold has both commodity, monetary and financial attributes, and its price fluctuations are affected by multiple factors such as the global economic situation and geopolitics. Shuibei in Shenzhen is China's largest spot trading center for gold and jewelry. Gold material dealers in Shuibei engaging in 'gold pre-pricing transactions' may be suspected of violating relevant legal provisions, constituting the crime of illegal business operations, the crime of fraud, or the crime of running a casino.
I. 'Exorbitant-profit' gold and dealers who abscond
Recently, the price of gold has soared. As of August 16, 2025, the Shuibei gold median price was quoted at RMB 835 per gram, whereas one month earlier, that is, on August 16, it was quoted at only RMB 781 per gram. In just one month, the Shuibei gold price rose by more than 7%, which can be called 'violent.'
Shuibei in Shenzhen, as the country's largest spot gold trading center, has 10 gold and jewelry wholesale markets of more than 10,000 square meters each, accounting for approximately 50% of the domestic gold and jewelry wholesale market share. The daily gold trading volume is extremely large, and the average daily circulation volume is very considerable, with approximately 5-10 tons of gold circulating in the market. It is estimated that the annual trading volume of spot gold in the Shuibei market exceeds RMB 700 billion, and the average daily spot gold trading volume is nearly RMB 2 billion.
According to reports, gold material dealers have recently engaged in large-scale absconding. It is said that Yuebaoxin alone made off with 260 kilograms of gold, with the amount involved exceeding RMB 200 million.
To the public, gold material dealers absconding seems inconceivable, but once you are familiar with how they operate, you will find that such implosions and absconding are inevitable.
Here, one common practice in the Shuibei market must be introduced —'gold pre-pricing'。
II. The 'gold pre-pricing' mechanism that has been abused
Gold pre-pricing was originally intended to hedge the risks borne by gold traders when buying and selling gold.This practice is a risk-hedging tool that arose because gold is high-priced, low-margin and highly volatile.
Its core advantage lies in the mechanism of 'pricing today, delivering in the future,' which helps merchants lock in costs or returns: for gold trading that ties up large amounts of capital, merchants need only pay a small deposit to lock in the price, greatly reducing capital pressure; at the same time, it converts the uncertainty of future price fluctuations into fixed costs, avoiding operational risks caused by severe short-term price fluctuations.
On this market foundation, suppliers can safeguard the stability of production plans by locking in prices in advance, while wholesalers can hedge against the risk of increases in procurement prices.
Gold price booking initially had four models, each targeting a specific market need:
- 1. Price-locked purchase of materials: To avoid increases in the gold price when purchasing in the future, a gold wholesaler agrees with a supplier in advance on a procurement price; regardless of the actual gold price at maturity, the transaction is concluded at the agreed price, ensuring that procurement costs remain controllable.
- 2. Price-locked sale of materials: A gold recycler is confident of acquiring a large quantity of gold but is concerned that the gold price will fall when it sells in the future; it therefore agrees with a downstream purchaser in advance on a sale price, locking in the proceeds of the sale and avoiding the risk of a price decline.
- 3. Deferred settlement for materials supplied: A merchant holds a large quantity of physical gold and wishes to sell it to recover funds, but the merchant anticipates that the gold price will rise in the future; the merchant therefore agrees with a downstream purchaser to settle part of the amount first in order to recover funds, and to settle the remainder later, thereby locking in the expectation of an increase and, at maturity, settling at the price then prevailing to profit from the price difference.
- 4. Deferred settlement for materials collected: A merchant wishes to purchase a large quantity of physical gold but anticipates that the gold price will fall in the future; the merchant therefore agrees with an upstream supplier to purchase at the current price, pays part of the amount, and settles the remaining amount later, thereby locking in the expectation of a decline and avoiding losses to itself caused by a fall in the gold price.
Later, a less formal model of gold price booking emerged:
For example, you can book 1 kilogram of gold with 10,000 yuan. If the gold price is currently 800,000 yuan per kilogram, that is equivalent to your using 80 times leverage.
Specifically, for every 1 yuan fluctuation in the gold price per gram, the value of 1 kilogram of gold changes by 1,000 yuan.
If the gold price rises by 1 yuan, you can earn 1,000 yuan; if the gold price falls by 1 yuan, you lose 1,000 yuan.
If the gold price falls by 10 yuan, your loss reaches 10,000 yuan of margin, which will trigger a margin call, and your 10,000 yuan will be completely wiped out.
Although this kind of high-leverage operation may make big money, the risk of losing money also becomes particularly large.
In this type of arrangement, generally you will not take direct delivery of the gold, because if you want to obtain physical gold, you must pay an additional 790,000 yuan at the market price. Therefore, many participants do not actually want the gold; rather, they want to take advantage of price fluctuations, buy low and sell high, make quick money, and have no intention of holding gold for the long term.
Of course, Shuibei has other arrangementsinterest-bearing custody and lending of old materials, and if you friends are interested, we can discuss these later.
This gold pre-order price arrangement may still be operated by many merchants in Shuibei at present, but it is rumored that a special rectification task force has been established and a heavy-handed rectification is imminent.
III. Reasons for the Blowups in "Gold Pre-Order Pricing"
1. The futures market is essentially a "zero-sum game": This kind of trading is like two people betting against each other; the money you win is exactly what the other party loses, and vice versa. There is no win-win situation. Because the parties' interests conflict so greatly, problems are very likely to arise.
2. Payment crises triggered by price volatility: If the gold price fluctuates within a range, materials dealers have enough time to respond; but if there is a one-way upward trend like that of the past month, many people will want to lock in their profits quickly and will all come to withdraw funds. Just like Yuebaoxin, when the gold price surged, too many people wanted to withdraw, and the materials dealer could not come up with enough money to cover the price difference; anticipating that the materials dealer's funds were about to break, it simply absconded with the money. Abrupt changes in market conditions and an inability to turn over funds are the key reasons such transactions always run into trouble.
3. Materials dealers act as both “players” and “referees”: Gold-trading materials dealers both set the rules of the game—such as how settlement is done, under what circumstances a margin call or forced liquidation occurs, how much margin must be paid, and where the margin is deposited—and directly participate in the wager. This is equivalent to one person being both a player and a referee, occupying an absolute advantage, making trading particularly unfair and harming investors' rights and interests.
4. The “underground” futures market lacks regulation: This kind of gold pre-order price trading is in fact leveraged underground futures trading. Although it resembles formal futures, because there is no regulation and no third party helping to manage the money, speculators believe the money can be withdrawn at any time; in reality, once the money reaches the materials dealer, no one knows where these funds ultimately flow, and a premeditated absconding by the materials dealer is simply not difficult.
IV. Criminal liability of “gold pre-order pricing”
Based on the author's experience handling criminal cases in the past, the “gold pre-order pricing” scheme, depending on the specific circumstances, in fact involves the following criminal charges:
Illegal business operation:Without approval from the relevant competent state authorities, engaging in futures business without authorization constitutes illegal business operation. This type of off-exchange gold wagering activity in the Shuibei market appears to be disguised futures trading, yet it has not obtained permission from financial regulatory authorities and disrupts market order; if the amount involved is huge and the impact is egregious, this crime is constituted.
Fraud:If a gold materials dealer, with the purpose of illegal possession, fabricates trading scenarios such as “guaranteed profit without loss,” conceals the wagering nature, or misappropriates customers' “pre-order payments” without purchasing gold to prepare for delivery to customers, and merely forcibly liquidates investors' “pre-order payments” through price rises and falls, this crime may be constituted.
Crime of operating a gambling establishment:The conduct of a gold materials merchant obtaining profits by controlling trading rules is essentially similar to the role of a banker operating a gambling establishment. When gold speculative trading activities possess the characteristics of "being for the purpose of profit, setting fixed rules, and obtaining profits through commissions or price spreads," they may be determined to constitute this crime.
Theory is gray, while reality is colorful. It is difficult for this article to exhaust all kinds of situations in reality. If you encounter such issues, it is recommended that you seek professional legal advice, or you may contact the author through the backend for consultation.
