Hong Kong aims to be an international gold trading market to consolidate its status as a global financial center,

It has planned to double its gold storage capacity from 150 metric tons to around 300 metric tons and is hammering out “a robust and transparent regulatory framework” to match, if not surpass, the three gold trading markets – the New York Mercantile Exchange, the London Bullion Market Association  and the Shanghai Gold Exchange.

A HKSAR government source declined to give timetable for the city to upgrade its gold storage capacity, but a dedicated working group is expected to be formed by the end of the year to spearhead the initiative. Chief Executive  John Lee Ka-chiu said in his 2024 Policy Address on Wednesday the Financial Services and Treasury Bureau will set up a working group to promote Hong Kong’s standing as a gold trading pivot.

The bold vision unveiled In this year’s Policy Address led to gold concept shares surging on the Hong Kong stock market for two consecutive days. The index of Hong Kong-listed gold and precious metals stocks rallied 3.7 percent to close the week in Friday’s trading. China Silver Group spearheaded the gains, picking up five percent to close at HK$0.315 ($o.o41). Other notable performers included Lingbao Gold Group, which rose 4.17 percent, and Zhaojin Mining Industry, which advanced 3.98 percent.

Hong Kong, often referred to as the “goose that lays the golden egg”, now aspires to be a “golden egg” itself.

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In his third Policy Address – his first since the enactment of the Safeguarding National Security Ordinance – Lee said the special administrative region’s security and stability give it a “clear edge as an attractive place for physical gold storage, driving more gold trading, settlement and delivery activities, and potentially propelling it to become a gold center of the world”.

“This will ensure that Hong Kong’s gold market is internationally recognized and trusted, enabling it to compete effectively with other global financial hubs,” Ken Ip, chairman of the Asia MarTech Society, told China Daily. The Chinese Gold & Silver Exchange Society – Hong Kong’s gold exchange – welcomed the SAR government’s move.

Lee said the SAR ranks among the world’s largest import and export markets for gold in terms of volume. According to the Observatory of Economic Complexity, Hong Kong was the world’s fourth-largest exporter of gold, and the sixth-largest importer of the metal in 2022.

The source said the SAR government has taken the initiative to sharpen the horn to better prepare the city for the upcoming shift in the gold-exchange landscape.

The Shanghai Gold Exchange is Asia’s largest gold market, while Hong Kong strives to tap the market as geopolitical pressures generate volumes of gold transactions and increase the demand for a safe place to diversify risks, both in physical delivery and on digital trading platforms.

“The city will be an option for investors to hedge their bets by storing gold outside Europe or London” the source said.

“The demand for gold products is on a growing trajectory amid concerns about geopolitics and the need to diversify asset allocation,” Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said on Thursday.

The SAR government’s views were echoed by financial experts. “Expanding gold reserves can diversify financial assets, provide stability during economic uncertainties and attract investors,” Mofiz Chan, chairman of the Hong Kong Securities and Futures Professionals Association, told China Daily.

“The gold exchange currently is for the local market. Our next move is to take it to the international level,” said Hui.  

Chan added: “Strategic planning is essential to maximize the potential benefits of increasing gold reserves.”

Tapping into the gold market is expected to create a new growth area in the local economy, but some economists are reportedly expecting only a “limited boost” for Hong Kong’s gross domestic product from the growing gold market.  After all, building a market is never easy, and it’s expected to take some time for the government’s plan to materialize.

Singapore – often seen as Hong Kong’s major regional competitor – recently opened a 500-ton gold depository, dwarfing the SAR’s current 150-ton storage at the airport vault.

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Ip said Hong Kong, aided by its strategic geographical location, is positioning itself as a central node in the global gold supply chain by reasserting its role as a “superconnector” in the trading of strategic materials like gold and nonferrous metals.

“Different parties on the Chinese mainland will support us. The demand is there, but the major challenge is how to converge supply and demand and take advantage of it,” said Hui.

China has been one of the world’s largest importers of gold for many years. China and the HKSAR together accounted for one-fifth of the world’s gold imports in 2022, according to the OEC.

Contact the writer at jessicachen@chinadailyhk.com