OANDA Japan cut maximum position sizes for gold trading by 70% effective immediately, marking the broker's second emergency intervention in precious metals markets within two weeks as wild price swings strain market infrastructure.The broker reduced maximum open positions for XAU/USD from 100 lots to 30 lots, according to a client notice issued Friday. The move comes as gold whipsawed from $5,600 per ounce on January 29 to $4,400 just four days later, before recovering to around $4,980 today."Currently, we are seeing extremely volatile price movements in the precious metals market that are significantly higher than normal," OANDA Japan stated in the notice. The broker said the restrictions aim "to protect our customers' assets and ensure the safety of their transactions."Liquidity Evaporates as Spreads WidenOANDA Japan flagged "extremely low liquidity" and rapidly widening spreads as primary concerns. The broker warned that margin rates and funding costs for both gold and silver CFDs may be adjusted without advance notice due to deteriorating market conditions."As a result of sudden price fluctuations, the precious metals market has become extremely volatile and liquidity has become extremely low, resulting in a rapid widening of spreads," the firm said.Transaction costs with counterparties have risen sharply as volatility persists. Gold dropped more than 3% during Thursday's session, falling back below $5,000, before climbing 1% Friday to trade near $4,980.Second Precious Metals Intervention in Two WeeksThe gold restrictions follow similar emergency measures OANDA Japan imposed on silver trading on January 29. That intervention slashed maximum silver leverage from 20:1 to 5:1 and cut position limits by 75% as silver climbed toward $120 per ounce.Both moves come after a historic market crash that began January 30 erased an estimated $7.4 trillion in precious metals market value. Gold plunged 9-12% in a single day, while silver suffered its worst daily drop since 1980, falling 26-31%.The Chicago Mercantile Exchange switched to percentage-based margin calculations in January as the rally intensified, while liquidity provider Scope Prime adjusted spreads in response to the CME changes.Brokers Scramble as Retail Interest SurgesTrading activity at broker Axi has been dominated by gold contracts as retail interest more than doubled during the recent price surge. CFD broker ACCM reported record January trading volume of $285 billion, with gold accounting for over 67% of the total.However, some executives have raised concerns about the sustainability of the rally. Scope Markets EU CEO Constantinos Shakallis warned that Wall Street's $6,000 price targets may be luring retail traders into a speculative trap similar to 1980's gold crash.Wells Fargo dramatically upgraded its year-end gold forecast to $6,100-$6,300 earlier this month as China's central bank extended its gold buying spree for a 15th consecutive month.OANDA Japan said it will continue monitoring the situation closely and "strongly recommend that customers actively seek out information through reliable financial news and other sources, and that they manage their funds with sufficient margin for all precious metal transactions." This article was written by Damian Chmiel at www.financemagnates.com.

Read full article on FINANCEMAGNETS