In plain terms, Chan’s remarks signal one thing: Hong Kong aims to become a new global voice in gold pricing. Behind this move lies China’s dissatisfaction with a long-standing imbalance — London dominates spot pricing, New York controls futures, while Asia, the largest consumer and producer of gold, has remained largely on the sidelines. This time, Hong Kong, in coordination with Shanghai, is deploying capital, expanding vault capacity, passing legislation, and offering tax exemptions to seize both the “cost advantage” and the “efficiency advantage” of global gold trading.

Why Have London and New York Dominated Gold for a Century?

According to data from the London Bullion Market Association, in December 2025 the average daily notional value of London’s over-the-counter gold trading reached $216 billion, while CME’s gold futures averaged around $85 billion per day. London and New York’s dominance is not simply about historical prestige or financial legacy. It rests on a sophisticated combination of policy advantages: low-tax environments, centralized clearing, mature industry governance, and globally recognized warehouse receipt credibility.

Meanwhile, China ranks first globally in both gold production and consumption. The People’s Bank of China has increased gold reserves for fifteen consecutive months, reaching 2,306 tons by the end of December 2025. Despite this scale, China has had little say in pricing — global gold prices open in London, move intraday in New York, and Asia largely follows. This imbalance — where real demand supports the market but lacks pricing power — is precisely what Hong Kong now aims to change.

Hong Kong’s Four Strategic Moves

First Move: Expanding Vault Capacity to Global Scale

The Hong Kong Airport Authority has launched a vault expansion project aiming to raise gold storage capacity to over 2,000 tons within three years — nearly equivalent to annual global central bank purchases. London’s LBMA has already integrated Hong Kong into its global vault network, with more than a dozen LBMA-certified vaults now operating locally.

Second Move: Establishing an Independent Clearing System

Previously, Hong Kong gold trading relied on bilateral clearing, which was inefficient and risk-prone. In late January, Hong Kong signed an agreement with the Shanghai Gold Exchange to establish the Hong Kong Precious Metals Central Clearing System Company, fully owned by the government, with trial operations planned within the year. Representatives from the Shanghai Gold Exchange will participate in rule-setting and institutional recognition, signaling China’s effort to internationalize its clearing standards.

Third Move: Leveraging Tax Incentives

London attracts global gold institutions largely due to tax advantages — physical gold is VAT-exempt and financial instruments are lightly taxed. Hong Kong is now directly benchmarking this model by studying special tax concessions for qualified gold trading and settlement institutions. For firms generating billions in annual revenue, even a one-percent tax reduction translates into tens of millions in additional profit.

Fourth Move: Digital Innovation

Hong Kong plans to support the distribution of gold funds via digital asset platforms — an area where London lags. London’s market structure remains traditional and less digitized, with complex trading processes. As a global digital asset hub, Hong Kong is integrating gold with digital infrastructure, lowering investment thresholds and attracting younger investors. On January 29, the Hang Seng Gold ETF was listed, becoming the first Hong Kong ETF to support physical gold redemption, with storage, trading, and redemption fully localized.

Significant Challenges Remain

The biggest hurdle lies in integration with international market standards. London’s OTC model and New York’s futures pricing mechanism have operated for over a century, forming entrenched trading habits, legal frameworks, and credit systems. Whether Hong Kong’s new central clearing system gains acceptance among global institutions will take time.

Additionally, differences between Shanghai and Hong Kong in clearing rules, regulatory systems, and property rights recognition will require careful coordination, particularly in cross-border delivery. Scholars note that such adjustments are inevitable in any serious push toward internationalization.

Implications for Investors

First, RMB-denominated gold assets are likely to become more active. As Hong Kong expands global RMB gold trading and offers offshore delivery options, international participation may increase — a long-term positive for RMB internationalization.

Second, gold investment channels will become more diversified and accessible. Products such as the Hang Seng Gold ETF allow retail investors to participate with lower barriers while retaining physical redemption options.

Third, Chinese buying will increasingly serve as a structural support for gold prices. At times of global volatility, premiums on the Shanghai Gold Exchange have exceeded London by significant margins, reflecting resilient physical demand. This structural bid may alter gold’s volatility characteristics over time.

In summary, the logic driving gold price movements in the coming years will become more complex. Beyond traditional variables such as the U.S. dollar, interest rates, and geopolitical risks, a new factor will play a growing role: the rise of Asian pricing power.