Page 21 - Bullion World Volume 5 Issue 06 June 2025

Bullion World | Volume 5 | Issue 06 | June 2025
Bullion World | Volume 5 | Issue 06 | June 2025
The following points are Gold’s new role in the Age of Turbulence
particularly insightful: In my opinion, this press release has all the elements,
1. The driver behind these policies appears to be: although not the explicitly stated aim, to develop Hong
“a resolution adopted by the Third Plenary Session Kong into a powerful sovereign gold hub.
of the 20th Central Committee of the Communist
Party of China.” Sovereign gold hubs require three mutually
symbiotic components:
2. The rationale: “Gold serves as a crucial anchor in
the precious metals category, possessing multiple 1. Vaulting and logistics infrastructures (The
attributes as a commodity, a reserve asset, and Foundation): Efficient, secure, and presentable
an investment product. Under increasing global vaults, testing labs and related supporting services
political and economic uncertainties, gold is one are needed to reassure depositors. Hong Kong
of the key hedging tools. With the geopolitical currently does not have custom-built facilities and
environment becoming more complex and relies mostly on a warehouse near the airport.
some regional situations remaining unclear, it is Given Hong Kong’s stated policy to “catch up to
expected that global demand for gold will remain Singapore”, it will probably be a matter of time
substantial.” before more impressive, and costly, facilities are
established. This poses the question as to why
3. Infrastructure improvements: “As the first step, the Central Committee of the Communist Party is
the Government will focus on the development championing such efforts, as costs could not be
of world-class gold storage facilities, thereby recovered by simply attracting a bit more of the
attracting more investors and users from different notoriously low-margin gold trading business to
economies, including the Middle East and Hong Kong.
Southeast Asia, to store gold in Hong Kong.”
2. Jurisdictional confidence (The Reassurance):
4. Ecosystem establishment: “Based on increased Given the rather worrying interventions in the
storage, we expect to scale up associated support Hong Kong legal framework by Mainland China
services in insurance, testing and certification, and the increasing geopolitical tension between
logistics, etc, while in parallel expanding related China and the United States, it is unlikely that
transactions including collateral, loan and hedging, Westerns institutions or clients will entrust
hence creating a comprehensive ecosystem in a significant amounts of gold to Hong Kong in the
progressive manner.” near future. It would, therefore, be safe to assume
that the ultimate target market for these efforts
5. Integration: “This will drive all-round multi- will be neither Westerners nor Mainland Chinese
currency trading, clearing and delivery, as well nationals (gold being tightly regulated in China).
as the development of the regulatory system Hong Kong’s long-term target is likely the rest
(covering transactions using offshore Renminbi), of the world, with BRICS member and partner
thereby establishing a holistic gold trading centre countries being increasingly concerned about
with an industry chain. We will also as appropriate politically motivated US sanctions, as the primary
explore with the Mainland institutions (including target market. In particular, sovereign entities might
financial regulators) mutual access with the want to relocate from London due to increasing
Mainland financial market.” geopolitical concerns.

To implement these policies, the Hong Kong 3. Gold-based financial ecosystem (The Utility):
Financial Services and the Treasury Bureau Ultimately a gold hub‘s success is largely defined
formed a multidisciplinary working group, whose by the utility that gold depositors can expect
members were finalised on December 18, 2024. This from vaulting physical precious metals there. As
working group will cover “gold supply and demand, of early 2025, London has nearly US$45 billion
product development, application of standards, worth of daily gold liquidity and vaults over 8,000
clearing mechanism, logistics and storage, testing tonnes of gold, providing very liquid markets and
and certification, talent training, cross-boundary low vaulting fees. While the United Kingdom has
collaboration, etc”. sold most of its own gold reserves, it does have

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