Hong Kong's gold trading infrastructure has taken a significant step forward.
On July 7, the Hong Kong Special Administrative Region Government's Financial Services and the Treasury Bureau announced the official commencement of pilot operations for the new Hong Kong Gold Central Clearing and Settlement System. This system is overseen by the Hong Kong Precious Metals Clearing and Settlement Company Limited (HPMCS), which is wholly owned by the Hong Kong SAR government, with the aim of providing efficient and reliable clearing and settlement services for bilateral and over-the-counter gold transactions. A series of supporting measures were also launched concurrently.
Looking at the list of major market participants in the pilot operations, it includes 41 institutions such as banks, securities firms, and mining companies. It was noted that several banks announced they had successfully executed the first day's transactions and settlements following the system's launch.
It was further observed that the launch of the pilot for the Hong Kong Gold Central Clearing and Settlement System was accompanied by the simultaneous introduction of eight supporting measures, aimed at establishing a modernized and comprehensive gold trading ecosystem to further consolidate Hong Kong's position as an international hub for gold trading, clearing, and reserves.
These supporting measures include launching the first phase of "physical connectivity" with the Shanghai Gold Exchange, introducing a new "HAU" price code, expanding storage capacity and enhancing refining capacity, enriching gold investment products, studying tax incentives, coordinating insurance arrangements, increasing flexibility for Mandatory Provident Fund (MPF) investments in gold exchange-traded funds (ETFs), and establishing an industry-led trade association.
Notably, connectivity with the mainland market is one of the key strategies for Hong Kong in building itself into an international gold trading center.
On July 7, the Hong Kong Financial Services and the Treasury Bureau and the Shanghai Gold Exchange launched the first phase of "physical connectivity." HPMCS has applied to become an international member of the Shanghai Gold Exchange and has opened a physical gold account. Market participants can choose to deposit their physical gold holdings into the Shanghai Gold Exchange International Board's designated warehouse in Hong Kong through this account.
Through two-way transfers, market participants can participate in the Shanghai Gold Exchange's on-exchange market and Hong Kong's over-the-counter market respectively, facilitating the flow of physical gold between the HPMCS system and the Shanghai Gold Exchange system, effectively connecting the gold markets of Hong Kong and Shanghai.
On the same day, People's Bank of China Governor Pan Gongsheng also mentioned at the Hong Kong Money and Fixed Income Summit supporting the development of Hong Kong's gold market and promoting connectivity between the two markets. Previously, the central bank guided the Shanghai Gold Exchange to establish its first overseas gold delivery warehouse in Hong Kong and launched gold trading contracts deliverable in Hong Kong. It actively supports Hong Kong in establishing a gold clearing and settlement system and achieving connectivity for gold trading and delivery with the Shanghai Gold Exchange.
Industrial and Commercial Bank of China (Asia) Limited, The Hongkong and Shanghai Banking Corporation Limited, and Bank of China (Hong Kong) Limited participated in the first phase of "physical connectivity" as the first batch of market participants. The two-way transfers for this batch of banks were completed on the same day.
It is worth mentioning that a new "HAU" price code was also launched on the same day to display specific reference prices for the Hong Kong market. This code reflects indicative bid and ask prices provided by participants in the gold trading market, offering greater convenience and reference value for international banks, hedge funds, refiners, corporations, and sovereign institutions in terms of price discovery, liquidity, and overall trading participation, especially for participants active during Asian trading hours. Currently, Bloomberg and the London Stock Exchange Group platforms now provide this code for market reference.
Furthermore, regarding gold investment products, since January this year, the variety of gold investment products in the Hong Kong market has continued to increase, with the listing of three gold ETFs bringing the total number of related funds available for trading to six. Hong Kong Exchanges and Clearing Limited (HKEX) has relaunched its US dollar-denominated gold futures contract and introduced trading fee waivers and incentive programs to enhance overall market liquidity and attract broad market participation. At the same time, HKEX is exploring the development of a new renminbi-denominated gold futures contract, for which the Shanghai Gold Exchange will provide physical delivery support.
Regarding storage capacity, the Hong Kong Airport Authority has initiated a project to develop a thousand-ton-level storage facility to meet local storage and delivery needs, with the goal of expanding Hong Kong's total storage capacity to over 2,000 metric tons within three years.
It is reported that the Hong Kong SAR Government has submitted a bill to the Legislative Council to optimize the preferential tax regimes for funds and single-family offices, including expanding the scope of eligible investments to cover precious metals, thereby promoting investment activities related to precious metals. Additionally, the Hong Kong SAR Government is studying the provision of tax incentives for eligible institutions conducting gold trading and settlement in Hong Kong.
Hong Kong's Secretary for Financial Services and the Treasury, Christopher Hui, stated, "The pilot operation of the Hong Kong Gold Central Clearing and Settlement System is supported by comprehensive supporting measures. Our vision is to build a scalable unified platform that attracts global participants through reliable services in clearing, connectivity, price discovery, risk management, storage, and insurance. The diversified strategic initiatives demonstrate the government's determination to build a comprehensive and internationally competitive gold ecosystem, consolidating and enhancing Hong Kong's position as a leading gold center in Asia and globally."
With the commencement of the pilot operations for the Hong Kong Gold Central Clearing and Settlement System, the first batch of gold has been successfully deposited into designated warehouses, and the first batch of trading and settlement activities have been completed. The list of major market participants in the pilot includes a total of 41 institutions, including banks, securities firms, mining companies, refiners, jewelers, and technology companies.
Among them, the provisional direct participants of HPMCS include 11 institutions: Agricultural Bank of China Limited Hong Kong Branch, Australia and New Zealand Banking Group Limited, Bank of China (Hong Kong) Limited, Bank of Communications (Hong Kong) Limited, China Construction Bank (Asia) Corporation Limited, Citibank, The Hongkong and Shanghai Banking Corporation Limited, Industrial and Commercial Bank of China (Asia) Limited, JPMorgan Chase Bank, Standard Chartered Bank (Hong Kong) Limited, and UBS AG.
It was noted that on the evening of July 7, several banks announced they had successfully executed the first day's transactions and settlements following the system's launch.
The Head Office of Bank of Communications and its Hong Kong subsidiary completed Hong Kong gold transaction settlements with multiple financial institutions through the Hong Kong Gold Central Clearing and Settlement System, totaling 76,000 ounces, approximately equivalent to USD 315 million. Transaction types included spot, forward, and swap, with transaction currencies including Hong Kong gold against offshore renminbi, Hong Kong dollars, US dollars, and euros.
China Construction Bank (Asia) completed the physical warehousing of Hong Kong gold (HAU) and executed 16 trades with clearing on the system's launch day.
Bank of China stated that its domestic and overseas institutions coordinated and assisted dozens of market participants in completing gold transactions and settlements on the same day. Concurrently, Bank of China (Hong Kong) executed the first batch of "physical connectivity" trades, and BOC International simultaneously executed HKEX gold futures trades.
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