A new Hong Kong-based gold-clearing system will launch in July as part of the Chinese Special Administrative Region’s (HKSAR) push to become a global gold trading hub.
Western markets – London, New York, and Switzerland – have dominated the gold trade for nearly two centuries. However, with gold progressively flowing from West to East, China and other Asian hubs are developing the infrastructure to challenge Western dominance.
According to a Bloomberg report quoting anonymous officials close to the matter, the government-owned clearing system will “mirror” the financial infrastructure used by the LBMA in London. Participants will be able to settle trades through “unallocated” accounts, meaning that the customer can hold a claim against a clearer on a quantity of gold without the need to own specific numbered bars.
In practice, the system is similar to fractional reserve banking. The customer owns the rights to a specific quantity of metal held by a bullion bank. However, the bank does not segregate or earmark specific bars for that customer. Trading through this mechanism is faster and more liquid; however, it increases counterparty risk for the customer because she or he bears the credit risk of the bullion bank.
Most London precious metals trades are facilitated through unallocated accounts.
According to Bloomberg, Hong Kong has invited “a number” of banks friendly to China to participate in the new clearing system.
The HKSAR has also inked a cooperation pact with the Shanghai Gold Exchange to “promote long-term interconnectivity opportunities, with a more integrated renminbi-based Asian gold market in the making.”
Under the cooperative agreement, the Hong Kong Precious Metals Central Clearing Co. (wholly owned by the HKSAR government) will establish “a high-level, collaborative governance structure,” with the Shanghai Gold Exchange providing technical and regulatory input on system design, rulemaking, institutional access, risk management, and operational standards.
Cooperation between the Hong Kong clearing company and the Shanghai Gold Exchange will reportedly include facilitation of physical gold delivery, warehousing, and further enhancing financial connectivity between the two markets.
According to Bloomberg, the new clearing system has attracted “significant interest … particularly from trading houses and financial institutions seeking an alternative for trading gold within Asia, home to two of the world’s major bullion consumers in China and India.”
In another move to elevate its status as a gold hub, Hong Kong officials plan to expand the region’s gold storage capacity from 200 to more than 2,000 tonnes over the next three years.
Looking at the bigger picture, it reveals a slow but steady migration of the gold trade from the West to the East.
World Gold Council head of Asia-Pacific and global head of central banks, Shaokai Fan, noted this shift, saying the “center of gravity” of the gold market has shifted to the East, as gold consumption by emerging market economies is rapidly rising and the majority are concentrated in Asia.
Meanwhile, Chinese gold investment has primarily driven the recent bull market. Gold coin and bar demand hit a 12-year high of 1,374.1 tonnes in 2025 with a record-breaking value of $154 billion. More than half of that global coin and bar demand came from two countries – China and India.
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