(Mike Maharrey, Money Metals News Service) Hong Kong has launched trial operations of its gold clearing and settlement system, putting the region in a position to challenge Western dominance of the global gold market.
London, New York, and Switzerland have served as the center of the gold trade for nearly two centuries. However, with gold progressively flowing from West to East, China and other Asian hubs are developing the infrastructure to challenge Western dominance.
Hong Kong Precious Metals Central Clearing Company CEO John Lee Ka-chiu called the commencement of operations “a milestone.”
“The launch of Hong Kong’s central clearing system for gold will create a historic foundation, allowing us to take the next major step, and that’s building a comprehensive gold trading ecosystem.”
The government-owned clearing system will reportedly “mirror” the financial infrastructure used by the LBMA in London.
Lee said the company will offer “a comprehensive suite of services ranging from gold deposits and withdrawals to transaction settlements in the over-the-counter market in Hong Kong,” adding that a new gold price ticker – HAU – would be introduced to “ensure that Hong Kong gold prices are fully accessible to global market participants.”
According to Lee, the first transactions involved multiple banks and refiners, along with mining and jewelry companies.
The new gold clearing system also features a partnership with the Shanghai Gold Exchange. Lee said that “Delivery Connect” will “bridge the fiscal liquidity pools of both markets.”
Cooperation between the Hong Kong clearing company and the Shanghai Gold Exchange will reportedly include facilitation of physical gold delivery, warehousing, and further enhancing financial connectivity between the two markets. Through this partnership, gold stored in approved Hong Kong vaults can be transferred into the SGE system and vice versa. Once the metal is inside either system, it becomes eligible for settlement without having to be re-assayed or shipped through an entirely separate process.
The Hong Kong government is reportedly considering offering tax incentives for eligible institutions conducting gold trading and settlement in Hong Kong to boost interest and participation in the regional clearing house.
Swiss precious metals trader MKS PAMP will participate in the new clearing system. Company CEO James Emmett said the system reflects “the growing connectivity between mainland China and international markets.”
According to reporting by Bloomberg, participants in the Hong Kong clearing house will be able to settle trades through “unallocated” accounts, meaning that the customer can hold a claim against a clearer on a quantity of gold without the need to own specific numbered bars.
In practice, the system is similar to fractional reserve banking. The customer owns the rights to a specific quantity of metal held by a bullion bank. However, the bank does not segregate or earmark specific bars for that customer. Trading through this mechanism is faster and more liquid; however, it increases counterparty risk for the customer because she or he bears the credit risk of the bullion bank.
Most London precious metals trades are facilitated through unallocated accounts.
According to Bloomberg, Hong Kong has invited “a number” of banks friendly to China to participate in the new clearing system.
Lee said the company was also considering introducing a renminbi-denominated gold futures contract with delivery support from the Shanghai Gold Exchange in collaboration with Bloomberg.
JPMorgan Chase Hong Kong CEO Kwang Kam Shing told the South China Morning Post that the new system will support efforts to strengthen Hong Kong’s role as a key gold trading center for the Asia-Pacific region.
“Global investor demand for gold has been increasing, and we see Hong Kong playing an important role in this market by supporting liquidity across time zones and meeting evolving client needs.”
In another move to elevate its status as a gold hub, Hong Kong officials plan to expand the region’s gold storage capacity from 200 to more than 2,000 tonnes over the next three years.
Looking at the bigger picture, it reveals a slow but steady migration of the gold trade from the West to the East.
In 2024, World Gold Council head of Asia-Pacific and global head of central banks, Shaokai Fan, noted this shift, saying the “center of gravity” of the gold market has shifted to the East, as gold consumption by emerging market economies is rapidly rising and the majority is concentrated in Asia.
Meanwhile, Chinese gold investment has primarily driven the recent bull market. Gold coin and bar demand hit a 12-year high of 1,374.1 tonnes in 2025 with a record-breaking value of $154 billion. More than half of that global coin and bar demand came from two countries – China and India.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
