Anisha Bhaduri says city’s integrated gold ecosystem will likely inspire confidence

Last week, Hong Kong started trialing a new central clearing and settlement system for gold, lending it a first-mover advantage in the region as it endeavors to establish itself as Asia’s foremost bullion-trading hub. In June, Singapore announced it would establish an over-the-counter gold clearing system and introduce central bank gold-vaulting services before the end of the year. The special administrative region certainly beat Singapore to it.

But this is not really about mere regional one-upmanship or the race to leverage the robust demand for gold whose long-term prospects seem to entrance Asian investors. Certainly, in this part of the world, gold — a wedding and festivals fixture — has a sociocultural connotation going back millennia that places the commodity on a higher pedestal than any reserved for the average asset class.  

Global Times reported in late April that in the first quarter of 2026, China’s total gold consumption reached 394.9 billion yuan ($58.31 billion), a record high for any first quarter. It was widely reported last week that the People’s Bank of China (PBOC) extended its gold-buying streak to 20 months in June, recording what the World Gold Council described as its largest monthly increase since October 2023 as bullion prices ebbed. Last month, the PBOC added 480,000 troy ounces to China’s official gold reserves bringing them to 75.44 million ounces.

The World Gold Council points out how gold lends diversification to a portfolio and is often “correlated with the stock market during risk-on periods, while it decouples and becomes inversely correlated during periods of stress. This is unique amongst most hedges in the marketplace.” Significantly, in a report dated July 1, analyzing the midyear outlook, the council posited: “The first half of 2026 showed that gold remains sensitive to heightened geopolitical concerns and abrupt shifts in investor sentiment. It also showcased the growing relevance of Asian markets in gold price discovery.”

Hong Kong Chief Executive John Lee Ka-Chiu, who pledged in his 2025 Policy Address to establish Hong Kong’s gold storage facilities with a target capacity of over 2,000 metric tons in three years, said the gold clearing mechanism will help lay the groundwork for the city to contribute a global reference rate for the gold-trading market. How so? A new gold price benchmark called HAU, now live on Bloomberg, is the price ticker symbol for Hong Kong’s over-the-counter spot gold market, providing a dedicated Asian time-zone reference price for gold trading and clearing. As the London Stock Exchange Group described it, “The framework aims to strengthen regional price discovery, deepen liquidity and provide robust trading and clearing infrastructure for participants active during Asian market hours.” The World Gold Council pointed out in its global midyear outlook report that Asian trading hours have been instrumental in gold price rebounds in the first half of the year, while pullbacks tended to occur when United States’ markets were open.

If the Asian edge has been established, the credibility boost is undeniable. “A government-run clearing system gives a lot of credibility for global investors to utilize it,” Secretary for Financial Services and the Treasury Christopher Hui Ching-yu told China Global Television Network in January. In the same month, Hong Kong signed a landmark memorandum of understanding with the Shanghai Gold Exchange aimed at enhancing cross-border connectivity and integrating further with the Chinese mainland’s gold market.

The fact that Hong Kong seized on the eastward migration of gold to act strategically and in a timely fashion, ahead of regional peers, leading up to trialing its gold clearing system, is a nod to its financial pioneering prowess. Hong Kong is at an immense advantage from the explicit support outlined in the national 15th Five-Year Plan (2026-30) to develop the special administrative region as a commodity trading hub.

With global investors’ appetite for gold rising amid geopolitical turmoil as they seek alternatives to the US dollar, Hong Kong’s integrated gold ecosystem that draws on the advantages of the “one country, two systems” policy and leverages the strengths of cross-border connectivity, infrastructure and financial services will likely inspire confidence. Hong Kong Financial Secretary Paul Chan Mo-po stressed at the Hong Kong FIC & Bond Connect Summit last week, “As investors reassess allocation, liquidity and risk across markets, they look for platforms that are open, stable and predictable.” Hong Kong certainly fits the bill.

The author is an award-winning English-language fiction writer and current-affairs commentator.

The views do not necessarily reflect those of China Daily.