Hong Kong and Singapore are positioning themselves to be at the center of this challenge to London’s decades old gold trade dominance. Both cities are putting a lot of money into reconfiguring their infrastructure and services to attract more investors and traders. They want to be the regional hub for gold trading in the East. The effort to establish these regional gold hubs is picking up steam. This transformation underscores the changing patterns of global demand and international trade, particularly in light of recent geopolitical disruptions.
Hong Kong’s city leader, John Lee, recently announced ambitious plans to expand the territory’s gold storage capacity from 200 tonnes to over 2,000 tonnes within three years. This significant uptick is intended to strengthen Hong Kong’s status as an increasingly important hub in the international gold market. Meanwhile, Singapore boasts one of the largest maximum-security bullion vaults globally, capable of accommodating up to 10,000 tonnes of silver and 500 tonnes of gold. This facility is critical to Singapore’s strategy. On one side, it draws in private banks and family offices that need deep storage for their wealth.
Both cities have distinct advantages and disadvantages. As always, Singapore benefits from a singularly stable political environment. This stability allows the country to function without the political baggage that frequently accompanies Hong Kong’s existence as a Special Administrative Region of China. This neutrality could help Singapore become a more attractive hub for international investors worried about where their investments may be subject to government intervention.
For all of the differences between the two hubs, both are keenly aware of the shifting terrain in the gold trade. Gregor Gregersen, one of the leading voices in the industry, said,
“On the vaulting side, we are ahead in Singapore; on trading, I would say Hong Kong is ahead. Both hubs have realized that the world is changing, and they need to revisit their role when it comes to [gold].”
The competition between these two cities has ratcheted up as trade uncertainty becomes an ever-increasing cloud on the global economy. These changes have led to a growing demand for gold as a hedge against this newfound market volatility. In the case of gold bars and coins, U.S. demand saw a jaw-dropping 53 percent decline year-on-year. China, in comparison, had an extraordinary 44 percent increase in demand over the same period this year.
Beyond storage capacity, both Hong Kong and Singapore are building out their wholesale warehousing and refining capabilities. Hong Kong, for example, recently opened an offshore RMB vault for the very purpose of supporting such contracts and marketing them to foreign investors. These initiatives are a big deal and important steps toward creating strong infrastructure that can challenge London’s two-century-old stranglehold on the gold market.
At our recent AI-powered Commodity Trading Forum, industry veteran David Greely showcased the dramatic change in direction of the global gold trade, saying,
“The center for gold trading is increasingly moving East.” He further emphasized the potential for growth in this sector by asserting,
“There is a big untapped demand for an Asian trading hub.”
Though Hong Kong’s trading hands remain superior to Singapore’s for now, its neighbor is leading in the arena of vaulting facilities. This bifurcation allows each hub to amplify the strengths of the other. Combined, their vision is to ensure they grab the lion’s share of the global market. Like any great partnership, both cities are booming—and doubling down on their strengths. They’re positioned to become even more competitive on the world stage.
More than an air of optimism continues to shroud the region, as political instability perceived and otherwise still haunts some Western players’ minds. A former gold trader at JPMorgan and HSBC expressed these apprehensions:
“There is always this fear — is it a true international market, or is it something where, if the Chinese government didn’t like the result, they could change the rules?”
Neither city has an easy road ahead, but they are fighting and refusing to concede. …these countries have deepened their efforts to become significant players in the global gold trade. Albert Cheng, a key figure in this initiative, remarked on the daunting task ahead:
“London took 200 years to build the infrastructure to become the center of the world gold market. We have lots of work to do, but it won’t take us that long.”
As Hong Kong and Singapore continue to build out their infrastructure and iterate on their approaches, they’re not just competing with London, but evolving to better serve the increasingly sophisticated needs of global investors. Asia’s insatiable demand for precious metals continues to soar. At the same time, changing trade patterns have put these two cities at the center of where the gold trade will go in the future.