Hong Kong and Singapore pitch rival gold hubs to bullion market

The push by Hong Kong and Singapore to establish gold trading hubs aligns with a wider trend of diversification among central banks globally. With 45% of central banks surveyed by the World Gold Council in June planning to buy gold in the coming year, and increasing government debt levels strengthening the case for higher gold holdings, both cities are positioning themselves to capitalize on this demand. Their aim is to attract a share of the 39,000 tons of gold held by central banks, which would bolster their financial influence.

Hong Kong has initiated trial operations for a gold clearing system and a new price benchmark, with future plans to introduce offshore-yuan gold futures and allow real-time, multi-currency physical trade settlements. This strategy is partly designed to promote greater use of the Chinese currency. Singapore, in parallel, is developing gold vaulting services specifically for central banks, seeking to connect various global liquidity pools, including over-the-counter trading in London and the futures market in New York.

While the global market's deep liquidity suggests room for multiple hubs, the main challenge for both cities lies in persuading market participants to shift business from established locations. Hong Kong's political angle, leveraging its status as the largest offshore yuan market and its potential collaboration with gold-producing nations, offers a distinct advantage. However, its proximity to China is also viewed as a potential risk by some traders, who might prefer Singapore for its perceived neutrality.