Golden hour: why Hong Kong may finally succeed in becoming precious metal’s trading hub

Hong Kong has long been a global center for gold jewelry trade, thanks to its duty-free status and close proximity to China, the world's largest consumer of the precious metal. In July, the city set ambitious goals to become a global gold trading hub, comparable to New York and London. This effort gained momentum during a period of heightened geopolitical tensions, as geopolitical uncertainties have increased the appeal of gold as a safe-haven asset.

In early July, Hong Kong announced the launch of a central clearing and settlement system, along with a delivery link with the Shanghai Gold Exchange. Stephen Law Cheuk-kin, president of the Hong Kong Institute of Certified Public Accountants, explained that Hong Kong's unique value lies in its role as a superconnector and value-adder between China's gold market and global bullion markets.

With its extensive financial infrastructure, capital flows, and legal protections, Hong Kong is well-positioned to facilitate cross-border physical settlement and provide Asian clients with a local time-zone solution.

The launch of Hong Kong's US dollar gold futures contract on July 6, paired with a waived trading fee, has bolstered market liquidity. This, combined with the People's Bank of China's increased gold reserves and reduced US Treasury holdings, has made gold a core asset class in China's 15th five-year plan. The city's role as a global financial hub has provided the necessary infrastructure for trading, storing, financing, and delivering gold, further strengthening Hong Kong's position as a potential gold trading hub.