Hong Kong is advancing its bid to become an international gold trading hub, eyeing yuan-denominated products to ride the global gold boom and bolster the internationalization of the Chinese currency.
Investors are diversifying into precious metals as uncertainty rises amid a rapidly changing international landscape, said Christopher Hui, secretary for Hong Kong’s Financial Services and the Treasury, in an interview with Caixin Monday.
Compared with stocks and bonds, investors tend to prefer physical delivery of precious metals such as gold at locations geographically closer to them, possibly out of considerations of security, said Hui. As such, Hong Kong must seize this opportunity to expand local gold storage facilities.
As part of its efforts, the city will also build a central gold clearing system in line with international standards, Hui said. Settlements will be processed through Hong Kong’s Real-Time Gross Settlement system, a payment infrastructure that enables instant, final settlement of large-value interbank payments, including those in yuan.
The first step in establishing the gold clearing system will focus on addressing pain points in local and offshore markets, with subsequent efforts to advance cooperation with the mainland, Hui told Caixin.
The initial trial run of the clearing system is expected in 2026, according to a list of government tasks published in September.
The plan is reflected in the Hong Kong Chief Executive John Lee’s Policy Address published last month, which said the city will work with the Shanghai Gold Exchange (SGE) to prepare for mutual market access with the mainland.
Hong Kong and the mainland have already begun to integrate their gold markets. In June, the SGE opened its first offshore physical gold delivery vault in Hong Kong, a move that Hui said in a statement at the time would “attract more international investors to participate in the SGE’s trading and increase gold storage in Hong Kong.”
Gold demand has surged as investors seek safe-haven assets amid increasing economic uncertainty, a weakening U.S. dollar, and escalating geopolitical tensions. U.S. President Donald Trump’s tariff regime has only reinforced the metal’s appeal, repeatedly driving its price to new highs.
Official figures show that Hong Kong is gaining traction as a gold trading hub amid the global gold fever. The average transactions of U.S. dollar-denominated Loco London Gold traded on the Hong Kong Gold Exchange increased by 68.7% from the third quarter of 2024 to reach around 2.5 million troy ounces in the second quarter this year, according to an August report published by Hong Kong’s Legislative Council Secretariat.
As part of its efforts to enhance gold storage capability, the city will support its airport authority and financial institutions to establish gold storage facilities, with a target capacity of over 2,000 tonnes in three years, according to Lee’s September Policy Address. Capacity stood at 150 tonnes in late 2024.
Contact reporter Qing Na (qingna@caixin.com) and editor Jonathan Breen (jonathanbreen@caixin.com)
