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

** 博客文章文責自負,不代表本公司立場 **

Hong Kong's first 5-year plan, presented by the Chief Executive John Lee is an ambitious roadmap aiming to solidify its position as a global hub while deeply integrating with mainland China's development, particularly the Greater Bay Area (GBA).

The plan was devised after extensive consultation with the people of Hong Kong. More than 8,000 suggestions were submitted from all walks of life – from chambers of commerce and captains of industry to the grass roots represented by the district councils.

In the Legislative Council chambers on Wednesday, Lee presented both the very detailed 5-year plan as well as his policy plans for 2026-7. They are complementary. While the comprehensive 5-year plan is the roadmap for the future, his policy statements provide the tools as to how this will be achieved.

The plan is multi-faceted, touching upon economic diversification, talent cultivation, urban development, social welfare, and enhanced governance. It is designed to dovetail with the Central Government’s 15th five-year plan so that the development of the whole of China works in tandem with the Central Government’s thinking.

Economically, Hong Kong seeks to bolster its status as an international financial, trade, and maritime center. Key initiatives include expanding offshore RMB business, enhancing its commodity trading hub, and promoting green finance. In the meantime, Hong Kong will actively promote the use of RMB to settle government expenditure, and further enhance the capacity of the offshore RMB market in supporting the economy for the expansion and enabling of trade, investment, financing, and cross-boundary business dealings. Hong Kong will also support the wider use of RMB in cross-boundary businesses and facilitate the exchange between RMB and other regional currencies.

Significant emphasis is placed on developing high-value-added services in logistics, e-commerce, and aviation, including new air routes and an aviation ecosystem for aircraft parts. The plan also targets attracting international companies and family offices to establish regional headquarters in Hong Kong, leveraging its "going global" platform for mainland enterprises and a "two-way platform" for overseas businesses.

Innovation and technology are central to the future vision. The plan commits to increasing research and development (R&D) expenditure to 3 per cent of GDP after 2030, focusing on core areas like life and health technology, AI and robotics, microelectronics, and advanced manufacturing. Special funds – an industry oriented fund of $10 billion and a venture fund enhanced scheme of $2.5 billion are being set up to assist the innovation and technology industry.

University towns within the Northern Metropolis, along with expanded innovation parks like the Loop, Science Park, and Cyberport, are envisioned as crucial for nurturing talent and commercializing research. A dedicated effort to promote AI adoption across various sectors (finance, healthcare, legal, transport, etc.) is coupled with a robust governance framework to mitigate risks like deepfakes and ensure ethical use.

The Northern Metropolis is a cornerstone of the urban development strategy, envisioned as a vibrant hub for living, working, and studying. This includes developing three university towns, industrial parks, and high-end professional service areas. The plan aims to significantly increase housing and economic land supply, with a focus on improving living standards and transport connectivity within the Metropolis and the broader GBA.

Social well-being is addressed through enhancements in education, healthcare, and social protection. This includes strengthening AI literacy in schools, expanding higher education capacity, and fostering interdisciplinary programs. Healthcare reforms aim to improve primary healthcare, disease prevention, and the integration of Chinese and Western medicine. Measures to address an aging population, support young people, women, and families, and enhance labor protection are also detailed. Housing supply targets are set to reduce waiting times for public housing and promote home ownership.

The plan emphasizes strengthening governance, city resilience, and national security. This involves digitalizing public administration, setting up an "AI City Brain" for integrated urban management, enhancing disaster prevention, and upholding the "patriots administering Hong Kong" principle. Real time perception, risk alert, instant prediction, and synergised processing will be realised in the management and operation of the city, thereby creating an intelligent hub for city management and security governance. Deepening GBA integration extends to mutual recognition of professional qualifications, cross-boundary data flow, and collaborative projects in various sectors.

In essence, Hong Kong's five-year plan is an ambitious blueprint for transforming the city into a more innovative, integrated, and resilient hub, aligning its development with national strategies while addressing key domestic challenges.