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Why Hong Kong may finally succeed in becoming gold's trading hub
By Julie Zhang
South China Morning Post, Hong Kong
Monday, August 31, 2026
For decades, Hong Kong has been a hub for gold jewelry. Brands such as Chow Tai Fook and Chow Sang Sang have drawn buyers from the world over, aided by the city's duty-free status and its proximity to one of the world's largest gold-consuming markets.
Two years ago, when officials set the goal of making Hong Kong a global gold trading hub comparable to New York and London, it was met with scepticism. Similar efforts in the past had ended in failure.
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The doubts, however, began to fade in early July, when the city announced the launch of a central clearing and settlement system, alongside a delivery connect with the Shanghai Gold Exchange.
"Hong Kong's unique value is to be the superconnector and super value-adder between mainland China's gold market and international bullion markets," said Stephen Law Cheuk-kin, president of the Hong Kong Institute of Certified Public Accountants.
"The mainland is one of the world's most important gold-consuming, importing, and producing markets, while Hong Kong provides international capital, global banks, insurers, commodity traders, sophisticated legal and professional services, and multi-currency funding and hedging capabilities."
... Tensions send gold prices soaring
Hong Kong's gold ambition has resurfaced at a time when geopolitical tensions -- from Russia's invasion of Ukraine in 2022 to the U.S.-Israel war on Iran launched in February -- have profoundly transformed views on gold, long used as currency and a hedge in uncertain times.
Stephen Innes, managing partner at SPI Asset Management, wrote in a blog post on August 11 that the freezing of Russia's US$300 billion reserves by the U.S. and its allies in 2022 in response to the invasion of Ukraine was "not some obscure footnote in the history of sanctions."
He added: "A dollar asset held offshore may be liquid, deep, and backed by the world's largest economy, but under extreme circumstances it is still somebody else's liability sitting within somebody else's financial architecture.
"Gold is nobody else's liability."
Central banks, many of which hold U.S. dollar assets such as Treasuries, have increasingly turned to gold. Net purchases reached 289 tonnes in the second quarter of 2026, the strongest second quarter on record, compared with 166.5 tonnes a year earlier.
The global surge in gold demand had been accelerated by worries over expanding U.S. sovereign debt, volatile U.S. Treasuries yield, fluctuating Federal Reserve inflation policies, and the economic landscape under the Trump administration, analysts said.
For Beijing, concerns about Washington's weaponisation of the U.S. dollar have persisted for years, and gold has become one way to diversify its foreign exchange reserves and support the yuan's overseas use.
The People's Bank of China raised its gold reserves to 76.08 million ounces, valued at US$306.35 billion, at the end of July after adding 640,000 ounces -- the largest monthly increase since late 2023 and the 21st consecutive monthly purchase.
China also cut its U.S. Treasury holdings to a near 18-year low in June to U..S$633.4 billion.
After retreating from its January peak price of more than U.S.$5,600 per ounce -- an all-time record -- gold has rebounded on market worries over rising U.S. Treasury yields, with 30-year tranches now approaching a panic level of 5.2%.
The metal's price rose to about U.S.$4,607 per ounce on Friday, extending a rally after the U.S. Treasury said on August 19 that it would at least double the size of its liquidity-support buy-back operations for long-dated bonds.
... Hong Kong builds a gold ecosystem
Hong Kong's gold ambitions have gained momentum as Asian powers emerge as pillars of demand. China and India are the world's largest gold jewelry consumers, while central banks have added strong institutional support.
The city's role as an international financial centre -- with global standards and financial infrastructure, free capital flows, and legal protections -- has buoyed the push.
Guy Wolf, global head of market analytics at London-headquartered global commodities broker Marex, said Hong Kong's new gold clearing system was complementary to London and New York rather than a competitor.
"It enhances regional liquidity and settlement efficiency, and provides Asian clients with a local time-zone solution, helping to generate additional global gold market flows rather than displacing existing activity," he said.
The new system, operated by the wholly government-owned Hong Kong Precious Metals Central Clearing, has drawn 11 Chinese and international banks, with plans to expand participation.
Law of the Hong Kong accountants group said it could facilitate cross-border physical settlement and make Hong Kong a practical location for trading, storing, financing, and delivering gold with clearer links to demand in mainland China.
Hong Kong Exchanges and Clearing (HKEX), in its fourth attempt since the 1980s to build a viable gold derivatives venue, relaunched its U.S. dollar gold futures contract on July 6. To boost liquidity, HKEX paired the launch with a market-wide waiver of its U.S.$1 per contract trading fee until June 30, 2027.
The biggest support came from Beijing, which introduced the initial phase of delivery connect between the Hong Kong and Shanghai gold exchanges in July.
Unlike paper gold trading in many Western markets, physical bar delivery is handled in Hong Kong through HKEX's approved depository. On final settlement, ownership of the gold moves from the seller's vault account to the buyer.
The Shanghai Gold Exchange's first offshore certified vault in Hong Kong, launched last year, supports yuan-denominated gold trading and works alongside Hong Kong's central clearing system to link mainland China and international bullion markets.
Making gold a core asset class aligns with China's 15th five-year plan and "acts as a powerful catalyst for renminbi internationalization" through expanded yuan-denominated gold trading, settlement, and delivery, said Ming Lam, divisional councillor of the Greater China division at CPA Australia.
The London Bullion Market Association's suspension of qualified delivery status for some Chinese gold companies blacklisted by the U.S. Department of Homeland Security could further lift Hong Kong's role, market analysts said.
On August 19, the China Gold Association said the measures "lack any factual basis, violate market-oriented principles, and disrupt the stability of the global gold industry chain."
On the same day, HKEX reported record physical deliveries and a surge in its U.S. dollar-denominated futures trading, with 145kg (320lbs) delivered -- the highest single-day tally since the product's launch.
... Foreign institutions join in
Hong Kong's gold dream has won confidence from foreign banks and institutions. Eleven banks including ANZ, JPMorgan, Standard Chartered Hong Kong, HSBC, and UBS have joined the new clearing and settlement system.
"Attracting more internationally held gold to Hong Kong could help build the physical inventory and market depth required for a successful regional gold hub,"said Bernard Sin, regional director of Greater China at MKS PAMP Hong Kong. The Swiss company, one of the world's largest refiners and traders of precious metals, set up its regional headquarters in Hong Kong last November.
"Greater availability of physical metal can support trading, financing, lending,and delivery activity and, in turn, help develop liquidity across the wider market,” Sin said.
The city's government agencies have begun lobbying regional central banks, financial institutions,and others to make Hong Kong their reserve-storage destination.
Economies involved in the Belt and Road Initiative "look to diversify reserve assets and mitigate geopolitical risks, and Hong Kong provides a trusted venue for [gold] trading, storage, clearing,and delivery in the Asian time zone,"said a spokesman for the Financial Services and the Treasury Bureau (FSTB) in a written reply.
Where and how central banks store their reserves has become a pressing question amid global polarisation.
In May, FSTB promoted Hong Kong's gold-market opportunities at the Asian Development Bank's annual conference in Uzbekistan, attended by heads of central banks of member countries.
In July, the bureau signed a collaboration with Laos to create a framework to channel accredited Lao gold into Hong Kong.
Benjamin Wong, head of transport, logistics and industrials at InvestHK, the Hong Kong government's investment promotion arm, said the agency was working closely with the FSTB to identify potential companies from mainland China and overseas.
This partnership was aimed at "promoting Hong Kong's gold initiatives across the entire value chain from refining and transport to storage, trading,and insurance," Wong said, while expanding gold fund and financial product offerings.
The latest push came in mid-July, when Secretary for Financial Services and the Treasury Christopher Hui Ching-yu met Malaysian officials in Kuala Lumpur to explore closer collaboration in financial and gold markets.
... The vault rush
As Hong Kong positions itself as Asia's answer to London in gold trading, leading global companies are quietly investing in warehouses and manufacturing sites across the city to capture the bullion boom.
The Hong Kong Airport Authority has repeatedly expanded the capacity of the airport's precious metals depository, most recently setting a target of more than 2,000 tonnes within three years, up from its initial capacity of 150 tonnes.
Still, that remains a fraction of the 5,500 tonnes held in the Bank of England's gold vault, the world's second largest after the Federal Reserve Bank of New York.
"A lot of the physical gold bought by central banks is a kind of static position. They buy it and hold it for quite some time," said Vikas Gupta, head of trading, Asia currencies and emerging markets at JPMorgan Chase.
"It is important to attract gold inventory that can provide a base for active trading and settlement."
Non-monetary gold imports to Hong Kong rose to 242kg in July, up from 112kg in January, according to data released by the Census and Statistics Department.
China's largest courier, SF Express, was setting up a gold vault in Tsing Yi this year, according to a government list provided to the South China Morning Post. The site is in western Hong Kong, an area home to container yards and logistics warehouses.
Industrial and Commercial Bank of China, the mainland's largest state-owned lender by assets, was developing a precious-metals storage facility, according to the list.
Shenzhen-based Chow Tai King was building a gold refinery in Hung Hom and could further expand its Hong Kong operations, while Point Gold was moving into the city after acquiring a site for a gold refinery at Tai Po InnoPark last year, which it aimed to bring into operation by the end of 2026.
Standard Chartered Hong Kong said it planned to build its first gold storage facility in the city.
... Investment on the rise
The average daily trading volume of HKEX gold futures reached 9,974 contracts between July 6 and August 19, with total value hitting U.S.$1.35 billion. More than 30 participants had engaged with the contract since its relaunch, according to HKEX data.
Gold futures could help investors hedge against price risk and gain leveraged exposure without holding the physical metal, said Tom Chan Pak-lam, honorary president of the Institute of Securities Dealers.
Hong Kong's ambition to build a comprehensive gold ecosystem is underpinned by its cross-border wealth management business, ranked the world's largest at U.S.$2.95 trillion, according to InvestHK, with the financial sector driving demand for gold funds and gold-related products.
The government is also planning new tax incentives for hedge funds and family offices trading gold as an asset class.
"Family offices' interest in gold has been broadening, even through a volatile year" as they seek to "hold something that sits outside any single financial system when geopolitics turns unpredictable”, said William Chow, deputy group CEO of Raffles Family Office.
The allocations have become "steadier and more deliberate, rather than speculative buying," he added. They need a "trusted gold clearing and settlement, secure storage, deep liquidity, and a reference price they can rely on during Asian trading hours."
JPMorgan Chase's Gupta said linking demand and supply through Hong Kong was expected to result in "better price discovery."
Law of the accountants group, who is also a member of the Chinese People's Political Consultative Conference, said Hong Kong should improve transparency, liquidity, and interoperability of the pricing relationship between yuan-denominated gold prices and international U.S. dollar benchmarks, providing a "more credible" offshore platform for economies seeking to diversify currency and commodity-risk management.
Hong Kong's role must cover the full value chain -- physical trading, storage, refining, logistics, clearing, risk management, and investment products -- rather than simply establish another venue, Law said.
Over time, the objective should not be to force a single "Hong Kong price" or immediately displace London or New York, he added.
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