HK launches trial operation of gold clearing system

Chief Executive John Lee announced on Tuesday the launch of a trial operation of a new gold trading and clearing system, in a key step towards the city's goal of becoming a major bullion trading hub.

Speaking at the Hong Kong FIC & Bond Connect Summit, Lee said the system would offer comprehensive services, covering gold deposits and withdrawals, to transaction settlements for the over-the-counter market in the SAR.

He added that the initial gold deposits and first batch of transactions have been settled with the participation of multiple lenders, mining firms, refiners, jewellers and other investors in "milestone" trades.

"In a world beset with geopolitical crises and macroeconomic volatility, gold is becoming one of the key pillars for liquidity and risk management," Lee told participants.

"The launch of Hong Kong's central clearing system for gold will create the solid foundation, allowing us to take the next major step – and that's building a comprehensive gold trading ecosystem in Hong Kong, one that benefits a world of investors and institutional capital seeking safe-haven assets."

The system is managed by the government-owned Hong Kong Precious Metals Central Clearing, with board members coming from 11 banks, regulatory bodies and the Shanghai Gold Exchange.

Lee said Hong Kong would also introduce the initial phase of a so-called "Delivery Connect" – in partnership with Shanghai Gold Exchange – under the new infrastructure.

The scheme would help link the physical liquidity pools of both markets.

"It creates a streamlined mechanism for participants, allowing them to use gold holdings to settle transactions in both the Hong Kong and Shanghai markets," Lee said

A new gold price ticker tracking Hong Kong gold prices will also be accessible to global investors, offering a reference rate in the international market in collaboration with Bloomberg.

Meanwhile, the Hong Kong Exchanges and Clearing (HKEX) has also relaunched its US dollar gold futures contract, Lee added.

Looking ahead, he said the SAR would work to further strengthen the city's gold storage and refining facilities in the coming years, while seeking to offer tax benefits for eligible institutions looking to conduct gold trades and settlements in the city.

Authorities would also consider developing a new renminbi gold futures contract, with delivery support from the Shanghai Gold Exchange.

Edited by Tony Sabine ...