On January 26, amid the continued rise in international gold prices and persistent demand for safe-haven assets, the Hong Kong Financial Services and the Treasury Bureau signed a gold cooperation agreement with the Shanghai Gold Exchange, announcing the promotion of Hong Kong’s establishment as an international gold trading market and a gold central clearing system.
This initiative, on the surface, may seem like financial infrastructure development. However, within the larger context of geopolitical and financial dynamics, this arrangement is seen as a strategic move by the Chinese government to position Hong Kong as a crucial “buffer zone” amidst escalating global financial tensions. International gold trading and refining institutions have raised cautious concerns about Hong Kong’s ability to maintain liquidity, financial capability, and institutional credibility under pressure. In the future, Hong Kong citizens, businesses, and investors need to closely monitor three key indicators.
On January 26, during the Asian Financial Forum, the Hong Kong Financial Services and the Treasury Bureau, along with the Shanghai Gold Exchange, signed a gold cooperation agreement.
Zou Lan, Deputy Governor of the People’s Bank of China, expressed support for the development of the Hong Kong gold market to enhance its offshore renminbi market function and provide more choices for investors to allocate offshore renminbi assets in Hong Kong.
The Director of the Financial Services and the Treasury Bureau, Christopher Hui, mentioned that Hong Kong and Shanghai aim to promote the coordinated development of the two international financial centers and gold markets to better support the internationalization of the renminbi. Plans are in place to trial-run the “Hong Kong Gold Central Clearing System” within this year.
Chief Executive of the Hong Kong Special Administrative Region, Carrie Lam, stated during the forum that Hong Kong will expand its gold storage capacity with a goal to increase storage capacity to over 2,000 tons within the next three years.
The official rationale behind this collaboration is multifaceted: first, to strengthen Hong Kong’s role as an international financial center amidst record-high gold prices; second, to coordinate liquidity between the Hong Kong and mainland Chinese gold markets; and third, to provide international investors with renminbi-denominated gold trading and delivery channels.
However, the Shanghai Gold Exchange International Board (SGEI) has been in operation since 2014, allowing overseas investors to participate in renminbi-denominated gold trading. So, why establish a new platform in Hong Kong?
In recent years, the international gold market has been heating up continuously. On January 27, gold prices continued their upward trend, surpassing the historic high of $5,100 per ounce. Investors are flocking to precious metal assets amidst heightened geopolitical tensions.
The rise in gold prices is attributed to the reshaping of international relations by US President Trump, as well as the rapid surge driven by investors selling sovereign bonds and currencies.
Silver, another precious metal, has also hit historic highs in prices. The spot silver price broke through $110 per ounce.
The continuous surge in gold prices is seen as related to geopolitical tensions, inflation expectations, and uncertainty surrounding US dollar assets. As a traditional safe-haven asset, the value of gold is increasingly emphasized in global financial volatility.
Despite grand visions painted by officials, market sentiment is not entirely optimistic. According to a report by Radio Television Hong Kong, James Emmett, CEO of Swiss gold refining and trading company MKS PAMP, expressed cautious views at the Asian Financial Forum, sparking industry concerns.
Emmett emphasized that the key to developing the gold market in Hong Kong is ensuring sufficient market liquidity, including ensuring banks are willing to provide gold lending, smooth financing channels, and having adequate physical gold reserves to prevent a “squeeze” under market pressure. He also stressed the need for collaboration with financial institutions and insurance companies, as well as ensuring logistics, regulatory standards, and global consistency are tackled before Hong Kong can truly become a gold hub.
This perspective highlights a real risk: if market participants believe there is insufficient supply during emergencies, restricted financing, or lack of transparency in regulations, it will directly impact market participation. Compared to traditional gold centers like London and Zurich, Hong Kong currently lacks a complete derivatives market, clear international regulatory standards, and deep participation network of major banks.
This collaboration showcases Beijing’s repositioning of Hong Kong’s role in the global financial system, not just as a stock and bond market center but also as a hub for precious metal trading and clearing. However, the deviation between this strategic goal and the actual market operational capabilities remains evident.
Beijing aims to rapidly expand the scale and attractiveness of the Hong Kong gold market through institutional design, tax incentives, cross-border cooperation, and infrastructure development. However, even with trading systems and storage facilities in place, the crucial question remains whether Hong Kong can maintain liquidity and financial capability under pressure.
This contradiction reflects deeper issues concerning Hong Kong’s institutional credit positioning, which still differs fundamentally from established markets like London and New York. Financial market credit is not only built on physical infrastructure and policy support but also on market participants’ long-term trust in rule stability, legal certainty, and reliable hedging mechanisms.
Deputy Governor of the People’s Bank of China, Zou Lan, reiterated support for the development of the Hong Kong gold market to enhance its offshore renminbi market function.
As mentioned by Christopher Hui, the aim is to better support the internationalization of the renminbi.
Market skepticism and institutional risks hint at another reality: the rise of gold trading does not necessarily signify a breakthrough in the internationalization of the renminbi. This is because gold’s stored value nature makes it a hedging asset rather than a substitute for national currency credit; market participants engage in gold trading to mitigate risks and diversify asset allocation, not to directly bet on renminbi credit; the liquidity, exchange flexibility, and cross-border payment convenience of offshore renminbi are still subject to multiple constraints imposed by the Chinese system.
Therefore, while the vibrant activity in the Hong Kong gold market helps increase the frequency of renminbi use in specific trading scenarios, it cannot simply be viewed as a significant advancement towards renminbi internationalization or broad international recognition of renminbi credit itself.
To genuinely establish an active gold trading ecosystem, complementary facilities such as derivative trading, hedging mechanisms, asset management platforms need to be perfected, and a significant amount of international funds must be attracted – tasks that cannot be accomplished overnight.
For Hong Kong citizens, businesses, and investors in the upcoming years, observing three key indicators of the Hong Kong gold market may hold practical significance: 1. Whether the actual daily trading volume and market participants’ composition reach a level competitive with markets like London; 2. Whether the Hong Kong banking system can provide stable gold lending and financing services; 3. Whether a mature insurance, storage, clearing, and derivatives market ecosystem can be established.
These indicators not only determine whether Hong Kong can truly become a gold hub but also define its ability to act as a risk buffer zone in the global financial system. Finding a sustainable path between “strategic vision” and “market operations” will ultimately decide how far this gold strategic layout can go.