Hong Kong plans gold clearing system to strengthen role as trading hub

AI summary

*Hong Kong plans to launch a central gold clearing and settlement system in the first quarter of 2027. 

*The Hong Kong Monetary Authority is also considering increasing the Exchange Fund’s gold holdings. 

*An independent commentator suggested limiting the combined allocation to gold, silver, hedge funds and bitcoin to 10% to 20% of a portfolio. 

Hong Kong plans to launch a central clearing and settlement system for gold in the first quarter of 2027 as part of efforts to build a modern, full-chain gold trading ecosystem, the government said at a press conference on Friday.

The initiative was outlined in the city’s first five-year plan for economic and social development for 2026 to 2030 and the 2026 Policy Address.

Christopher Hui Ching-yu, Secretary for Financial Services and the Treasury, said gold and commodities are among the new engines for Hong Kong's future market development. 

Hui said the precious metal clearing system had operated smoothly during its pilot phase. 

“In terms of the quantum of gold that's been deposited through the system, I would say it has also been material.” Hui added, “The material quantum of the gold being deposited through the system is also a good sign that our overall plan to build Hong Kong into the international gold market has been well‑recognized.” 

As of Sep. 17, the SPDR Gold Trust (02840) had a fund size of US$147.47 billion. In comparison, the Hang Seng Gold ETF (03170) had assets under management of US$220.77 million.

Retail investors in Hong Kong are generally more concerned about investment choices, potential returns, and risks than the operation of clearing and settlement systems, said Kenny Wen, an independent stock commentator.

Wen said gold could play a role in investment portfolios. He suggested limiting the combined allocation to investments such as gold, silver, hedge funds and bitcoin to no more than 10% to 20% of a portfolio.

Hong Kong Exchanges and Clearing Limited will announce details later this year of new RMB-denominated and physically settled gold futures contracts,  with the aim of enhancing the global influence of the RMB in the pricing of precious metals.

Chief Executive John Lee Ka‑chiu said in Wednesday's policy address that the Securities and Futures Commission will strengthen the regulatory regime for over-the-counter derivatives to facilitate risk and capital management in gold and commodity trading.

The Hong Kong Monetary Authority is studying the possibility of the Exchange Fund moderately increasing its gold holdings and gradually transferring existing gold reserves to designated local warehouses. 

The government will establish a Gold Hotline to provide one-stop assistance to domestic and overseas gold traders participating in Hong Kong's gold trading ecosystem and will promote the establishment of a gold industry association.

Note: This report was written by students from The Young Financial Post editorial team. Generative AI was used for polishing sentences/grammar checking/correcting errors/generating images/research.  

Models used: Gemini, Doubao, ChatGPT, Grok, Perplexity. 

The final version was manually reviewed, edited, and verified by The Young Financial Post team.