China wants more than a Fort Knox from Hong Kong

Fri Aug 07 2026

The global gold rush is tilting east, and Beijing wants Hong Kong to play the fulcrum. China has launched a physical-delivery conduit with the offshore hub, in a move that could help shift price discovery towards a yuan-settled system. And on Friday, Bloomberg reported China's central bank has been shifting more of its reserves, opens new tab of the precious metal to Hong Kong. But London and New York still handle five times more trading. Forging a new balance in global markets will be harder than moving gold bars.

The physical gold, opens new tab Delivery Connect is the newest entrant in China's family of market-opening ‘connect’ schemes, following stock, bond and wealth-management links between the mainland and Hong Kong. Rolled out last month, it aims to cement the city's role in trading and clearance.

Physical delivery ⁠and storage are the lifeblood of bullion trading. London cleared 16.1 million troy ounces a day in May and held 9,464 metric tons of gold in its vaults at the end of June. China, though a major buyer of the yellow metal, tightly controls exports. Hong Kong’s current vaults can hold less than 200 tons, although the government is planning to make them 10 times bigger by 2030, with banks like HSBC, opens new tab and Standard Chartered, opens new tab both eyeing more storage. The gap means global trading and price discovery remain anchored in London and New York, which has scuppered attempts, opens new tab at breaking into the futures business by Hong Kong Exchanges and Clearing.

But the global market is shifting in ways that favour China's goals. Gold now accounts for 27% of global reserves, surpassing U.S. Treasuries at 22%. Hong Kong's 1.1 trillion yuan ($163 billion) and growing ⁠offshore currency pool gives the city greater draw among parties seeking insulation from dollar dominance and U.S. sanctions. A pricing and clearing hub in the local time zone is a natural fit for Asian buyers, who account for roughly 60% of global gold jewellery demand, per the World Gold Council, opens new tab. Easier movement between mainland vaults and offshore storage could also spur arbitrage and help enhance price discovery.

But real liquidity follows trust. Legal infrastructure is just as ⁠important as vault space in attracting investors, from bullion standards and custody arrangements to a deep market of specialists who can provide the necessary foundation for a functional futures market. On that front, Hong Kong still has work to do before it can really glitter as China's global gold hub.

Context News

• The ⁠People's Bank of China has built up more gold inventories in Hong Kong over the past few months, Bloomberg reported on August 7, citing unnamed sources who described the move as the acceleration of a trend in which the Chinese central bank has been moving ⁠gold reserves from London to the Asian financial hub.
• Hong Kong and Shanghai launched a new delivery service for gold in July known as the Delivery Connect. Market participants can choose to deposit their physical gold holdings into the designated vault of the Shanghai Gold Exchange International Board in Hong Kong through accounts with the connect programme.

Source: https://www.breakingviews.com/