Hong Kong is all that glitters with a new super gold vault open to the world

Within three years Hong Kong will see a new building at its international airport housing some 2,000 tonnes of gold bars worth about HK$2 trillion (US$260 billion) at today’s prices.

The super vault and its contents are part of a government plan to make Hong Kong a leading international gold trading centre. And already it’s making good progress in this direction.

Earlier in the year the Shanghai Gold Exchange (SGE) opened its first offshore delivery vault in Hong Kong and the London Metal Exchange in September approved three storage facilities in Hong Kong. China is the world’s biggest bullion consumer and the move by the SGE is seen as a step towards reducing the reliance on the US dollar and promoting the wider use of the yuan in international trade.

In his annual policy address last month, Chief Executive John Lee unveiled policies to increase the city's capacity for holding bullion and establish a central clearing system for gold to revive Hong Kong's status as a global hub for gold trading. He reiterated his ambitious plans at the British Chamber of Commerce (Britcham) summit earlier this month by inviting gold traders to set up refineries here and by supporting the creation of a local gold industry trade association.
Currently, local gold is stored in bank safe deposit boxes and in the Hong Kong International Airport Precious Metals Depository which has a capacity for 150 tonnes. The depository has been providing secure storage and physical settlement services to central banks, commodity exchanges, bullion banks, precious metal refineries and issuers of exchange-traded funds (ETFs) since 2009.

The depository, located near the airport’s cargo facilities, is expanding its capacity step by step initially to 200 tonnes and eventually it will reach its goal of 2000 tonnes by 2028, ranking it among the top 10 largest gold storage facilities in the world. The big ones, of course are the Federal Reserve Bank of New York with 6,000 tonnes and the Bank of England with 5,000 tonnes. The famed Fort Knox in Kentucky holds about 4,000 tonnes.

The international gold trading platform, CME Group has approved and licensed three warehouse facilities in Hong Kong – Brink’s Inc., Malca Amit Secure Logistics and Loomis International (HK) – for storage of kilo gold bars which can be used in settlement of CME gold kilobar futures contracts. Their storage facilities are located at the Hong Kong International Airport (HKIA), Tsuen Wan and Kwai Chung.

The Chinese Gold and Silver Exchange (CGSE), founded in 1910, is Hong Kong’s only physical gold and silver exchange, and is run by its members as a society, hence the name Chinese Gold and Silver Exchange Society. The Exchange is operated through a subsidiary company called ‘Hong Kong Precious Metals Exchange Limited’, established in 1994.

The gold industry in Hong Kong is much larger than one envisages and involves more than trading and storing but also includes processing. There are, for example, 13 CGSE accredited refineries in Hong Kong for its various deliverable contracts.

Gold refining is the process of purifying raw gold to remove impurities and separate it from other metals or materials with the goal to produce high-quality gold, often reaching 99.9 per cent or higher. This process is crucial for ensuring that gold meets the highest purity standards for various applications, including jewellery and electronic appliances.

All of the refineries are locally owned, except for one and most are accredited to produce 99 Tael Gold bars and 999.9 One Kilo bars, and a smaller subset of the refineries are accredited to produce 999.9 Five Tael bars.

Internationally, two gold refineries in Hong Kong that are also on the London Bullion Market Association (LBMA) Good Delivery List for gold: German refiner Heraeus which operates a refinery in Fanling, and Swiss refiner Metalor operating a precious metals refinery in Kwai Chung. Both have an annual gold refining capacity of 200 tonnes.

In keeping with its reputation of being the financial hub of Asia and a world player in international finance, the gold industry is poised to strengthen Hong Kong’s position in world rankings. Hong Kong is competing with established hubs like London and New York, as well as emerging markets in Singapore and Dubai. By expanding its gold storage and trading capabilities, Hong Kong is positioning itself to capture a greater share of the global gold market, especially in Asia.

Gold industry publication, BullionStar noted that the local operations of the international bullion banks, the vaults and transport providers, and the futures exchanges have all benefited from Hong Kong’s strategic position as a gateway to the Chinese Mainland and the SAR’s use by China as a gold trade entrepôt. A robust gold market would complete Hong Kong’s financial ecosystem and attract more international capital.

The Chief Executive quoted a Chinese proverb at the Britcham summit that goes, "real gold is not afraid of the melting pot", adding that the gold market is not afraid of whatever volatilities are thrown up to test us. Hong Kong is a survivor and has jumped every hurdle placed before it.

Overall, Hong Kong's pursuit of becoming a leading gold trading centre is a strategic response to global shifts and regional needs, firmly establishing its role as a vital link between international markets and the Chinese Mainland's demand.

Mark Pinkstone

** The blog article is the sole responsibility of the author and does not represent the position of our company. **

Hong Kong’s ambitious Northern Metropolis has received a shot in the arm with a HK$150 billion (US$19 billion) fund launch to kick-start the high-tech park’s development.

The site is massive, covering some 30,000 hectares, which is about one third of Hong Kong’s total land area and about the size of Philadelphia in the USA, or Edinburgh in Scotland.

And before the ink has dried since the announcement of the plan, more than 60 firms have moved into the first two buildings in the Phase 1 development of the San Tin Technopole, the centrepiece of the entire project. The infrastructure is already well in place: drainage has been laid, internal roads built with slip roads connecting to the main highway, electricity has been connected and buildings are sprouting like stalagmites while construction cranes dot the skyline. The area is a hive of activity.

When completed, the project will create 650,000 jobs and house 2.5 million people.

Naturally, such a project will require money, and Hong Kong has plenty of that. Hong Kong is the world’s top capital market, ranking the top spot for Initial Public Offerings (IPOs) in 2025. A combination of revenue earned from IPOs and bond sales, pushed Hong Kong’s 2025-26 budget to a surplus to some $3 billion (US$383 million). As Hong Kong is the envy of the world for its monetary management, raising the necessary funds for the $224 billion ($28 billion) project should not be difficult.

Normally, surpluses go into the government’s exchange fund, currently standing at $4.1 trillion ($524 billion), which is used to maintain the Hong Kong dollar’s peg to the US dollar. But with such ambitious plans afoot, Financial Secretary Paul Chan Mo-po has proposed taking some $150 billion ($19 billion) from the exchange fund to support the Northern Metropolis. Investment returns from the exchange fund last year topped $300 billion ($38 billion). This, he sees, as an investment, not an expenditure. After all, he said, this is only half of last year’s profits.

In his Budget speech last week Chan announced the setting up of a “Northern Metropolis Urban-Rural Integration Fund” which will entail an initial capital of $200 million ($25.5 million) to boost rural tourism in the area. Hong Kong is rich in heritage, and some 200 villages will benefit from the scheme. Another $1 billion ($128 million) will be earmarked for a heritage conservation fund for revitalzation projects and maintenance of historic buildings.

The government will also inject another $10 billion ($1.27 billion) into an adjacent project known as the Hetao Hong Kong Park, otherwise known as the Hong Kong-Shenzhen Innovation and Technology Park. A dedicated company for this development, set up by the government in 2023 is seeking public-private partnerships to take up its offer to occupy some 1 million square metre gross floor area on 87.7 hectares of land. It is expected this site alone will provide some 52,000 innovation and technology jobs.

Although the metropolis is mainly high-tech, it will also house a university town with accommodation for students and a training hospital, as well as possibly earmarking some land for private hospital development. Applications will soon be open to develop campuses in the Hung Shui Kiu/Ha Tsuen area with an offer of $10 billion ($1.3 billion) in loans to the successful applicants. Tertiary education bonds are likely to be issued to support the construction of the university and its facilities. The universities have the capacity to issue bonds with their substantial financial reserves and profitable self-financing programes. After all it is normal for universities elsewhere to raise capital by the issuance of bonds. The government can provide a guarantee for the bonds, allowing them to receive a credit rating equivalent to government bonds which currently stands at AA+.

Investors can rest assured the Chinese Central Government will do everything in its power to preserve its southern treasure for generations to come with Hong Kong being the pinnacle for the Greater Bay Area.