Gold traders from the Middle East and Russia
have been selling physical gold in Hong Kong at a discount of 15 to 20 per cent
since early April
·
Shift
in Gold Trade
o Surge in gold imports and trading in Hong
Kong
o Merchants from Russia and the Middle East
moving gold from Dubai due to regional conflict
·
Discounted
Gold Sales
o Gold sold at 15–20% below market price
for quick liquidation
o Traders bypassing intermediaries, selling
directly in Hong Kong
·
Reason
for Shift
o Security concerns after conflict involving
Iran and Israel
o Damage and instability in Dubai prompted
search for safer markets
o Hong Kong seen as a stable and liquid trading hub
·
Strategic
Advantages of Hong Kong
o Gateway to mainland China market
o Strong financial ecosystem and investor
base
o Long-standing gold trading history
o Yuan-denominated trading advantage
·
Infrastructure
Expansion
o Storage capacity expected to exceed 2,000 tonnes in next 3
years
o Growth driven by Airport Authority and
financial institutions
·
Policy
Support
o Government offering tax incentives for gold
refineries
o Collaboration with Shanghai Gold Exchange
to boost cross-border bullion trade
o Efforts to build a strong gold ecosystem
·
Rising
Industry Participation
o Interest from mainland and global firms in
Hong Kong Gold Exchange
o Expansion of refineries including global
players
·
Market
Trends
o Gold prices remain elevated (up ~6% this
year, 64% last year)
o Increased use of ETFs and stock exchange
listings for fundraising
·
Competition
with Singapore
o Singapore also a contender
o Hong Kong holds edge due to China linkage
and yuan liquidity
·
Global
Implication
o Possible long-term shift of gold trade from Dubai to Hong Kong
o Reflects how geopolitical tensions reshape
global commodity flows and financial hubs
Gold
imports and trading have surged in Hong Kong recently as merchants and investors
from the Middle East and Russia move their holdings from Dubai to the city amid
the regional war, according to the Hong Kong Gold Exchange (HKGX).
Since
early April, some gold merchants from these regions have been selling physical gold
in Hong Kong at a discount of 15 to 20 per cent to the market price, said Haywood
Cheung Tak-hay, chairman of HKGX.
“The
discounted sales were a result of the US-Israel war with Iran, which has led these
merchants to shift their gold stocks, which they originally planned to sell in Dubai,
to Hong Kong,” Cheung said in an interview with the South China Morning Post.
These
merchants offered discounts to Hong Kong buyers as they wanted to make a quick sale,
he said.
Some
of this gold was first sold in Dubai and then re-exported to Hong Kong, but now
the traders were selling the precious metal directly here, without going through
intermediaries, and were therefore able to offer a lower price, Cheung added, without
giving details as the official import data would only be available later.
Dubai,
the largest city in the United Arab Emirates, is a major gold-trading hub.
“After
the merchants saw buildings in Dubai damaged by Iranian missiles, it was natural
for the gold merchants to seek a safe haven to sell their yellow metal,” Cheung
said. “Hong Kong is a natural choice, as the city has a lot of gold buyers and traders,
and is close to the mainland market.”
Hong
Kong has been a gold-trading centre for more than a century and has a number of
gold shops and gold refineries, he said. The Airport Authority Hong Kong and financial
institutions were building facilities that could lift total storage capacity to
more than 2,000 tonnes within the next three years – about double Singapore’s estimated
1,000 tonnes, he added.
“It
is likely to be a long-term trend where more gold trading activity will shift from
Dubai to Hong Kong, as there are no signs that the Middle East conflict will be
resolved any time soon,” Cheung said.
While
Singapore could also attract gold trading from Dubai, Cheung said Hong Kong had
several advantages over Singapore.
“Hong
Kong is the gateway to mainland China, while the country is supporting the city
in developing as a gold trading and wealth management hub. Singapore does not have
similar support.”
The
HKGX was established last year to replace the Chinese Gold and Silver Exchange Society,
which has over 170 members. Cheung said some 30 mainland and international companies
had shown an interest in joining the exchange.
Gold
hit a record high of US$5,608 per ounce in January, before retreating to just below
US$4,610 on Monday. The precious metal has risen 6 per cent this year, after gaining
64 per cent last year.
The
Hong Kong government planned to offer tax incentives to encourage companies to build
refineries in the city to boost trading of the precious metal, Acting Secretary
for Financial Services and the Treasury Joseph Chan Ho-lim
told lawmakers in a meeting on Monday.
“Several
enterprises that are qualified to refine gold to international standards have expressed
interest in setting up in Hong Kong,” Chan said. “InvestHK
and relevant departments would support them in identifying suitable factory and
storage sites.”
The
city is currently home to two internationally recognised gold refineries – Heraeus
from Germany and Metalor from Japan. A third, mainland-backed
refinery – Point Gold International – was expected to begin operations in October.
An
increase in the number of gold traders and refineries would put the city in an advantageous
position in shifting trading away from Dubai, said Anderson Cheung, managing director
of global commodities at Best Profit Capital.
Chan
also said that the Financial Services and Treasury Bureau was working with cities
in the Greater Bay Area to increase supply of international-standard gold to be
traded and stored in Hong Kong. Airport Authority Hong Kong and financial institutions
have been building facilities that could exceed 2,000 tonnes in total storage capacity.
In
January, the government signed an agreement with the Shanghai Gold Exchange to deepen
cross-border connectivity in bullion trading.
The
government would also assist the industry in setting up an association to step up
promotion of Hong Kong’s gold ecosystem, Chan said.
He
said the HKGX had seen rising turnover in recent years, while gold industry players
were using the Hong Kong stock exchange to raise funds. Five gold exchange-traded
funds with assets worth HK$28 billion (US$3.6 billion) were listed on the stock
exchange, while several gold-related companies had raised HK$30 billion from their
listings last year.
Hong
Kong, as a yuan trading hub, could attract Dubai-based gold traders, said Best Profit’s
Cheung.
“Indian
and Turkish investors currently trade actively in Dubai, but some may consider shifting
to Hong Kong because we offer yuan-denominated gold trading and have strong logistics
for storing and transporting bullion,” he said.
Hong
Kong accounted for nearly 75 per cent of offshore yuan payments as of December,
followed by the UK at 7 per cent, according to data from the Society for Worldwide
Interbank Financial Telecommunication, an international financial payments network.
The
city held the largest pool of yuan outside mainland China, with about 1 trillion
yuan (US$140 billion) in deposits, according to data from the Hong Kong Monetary
Authority.