Hong Kong Gold Vault: China’s Bullion Power Play

As China aggressively seeks to exert greater influence on the global commodities landscape, Hong Kong is poised to become a pivotal battleground, particularly in the Gold market. Ambitious plans are underway to transform the city into a regional gold hub, but significant hurdles remain as Beijing juggles competing priorities of market dominance, resource security, and industrial control.

Hong Kong’s Golden Ambitions

Hong Kong is rolling out targeted incentives to lure gold refiners and precious metals companies, with a focus on achieving London Bullion Market Association (LBMA) certification. This move, spearheaded by InvestHK, aims to elevate Hong Kong’s status in wholesale bullion transactions. A key initiative is the collaboration with the Shanghai Gold Exchange and Shenzhen regulators to streamline trade between Hong Kong merchants and mainland refiners. These efforts extend to the development of ETF-linked products and even the exploration of tokenised gold.

The strategic importance of Hong Kong is further underscored by a recent agreement with the Shanghai Gold Exchange to establish a central gold clearing platform. This platform is designed to facilitate trade settlement and mitigate counterparty risk. The government has set an ambitious three-year goal to significantly expand gold storage capacity to over 2,000 metric tons, solidifying Hong Kong’s position as a regional gold reserve.

China’s Broader Commodities Strategy

China’s ambitions extend beyond gold, encompassing a broader strategy to secure its position in critical commodities. The National Development and Reform Commission (NDRC) is actively addressing overcapacity in heavy industries, particularly copper smelting. Concurrently, efforts are being intensified to bolster mineral exploration, build strategic reserves, and proactively secure resources from overseas.

The Quest for Pricing Power

Despite being the world’s leading gold producer and consumer, China’s influence on global gold pricing remains limited, with London and New York dominating the market. Hong Kong undersecretary for financial services and the treasury, Joseph Chan Ho-lim, has articulated a clear objective: to expand China’s market share and influence on international gold prices.

Chinese miners are leveraging Hong Kong’s exchange to Finance global acquisitions, exemplified by Zijin Gold International’s planned C$5.5 billion acquisition of Canada’s Allied Gold. The People’s Bank of China has also been steadily increasing its gold reserves for the past 15 months, reflecting a broader trend among nations seeking to safeguard their assets within their own borders, particularly in light of geopolitical uncertainties.

Strategic Priorities and Potential Pitfalls

China’s latest five-year plan highlights the importance of critical minerals such as rare earths and reaffirms its commitment to maintaining its leadership in this sector. This includes tightening export controls to safeguard its strategic advantage. The plan also anticipates significant grid expansion and investment in clean energy, which are expected to drive up demand for copper and aluminium. However, the NDRC has reiterated concerns about overcapacity, specifically in copper smelting, signalling potential regulatory interventions to manage industry growth.

Global Demand and Investment Trends

Analysts at Swiss Resource Capital highlight copper’s critical role in the renewable energy transition and electrification, making it a key focus for investors and policymakers. Gold, meanwhile, continues to attract buyers seeking a safe haven in times of economic uncertainty. China’s emphasis on industrial modernisation in its 2026-2030 planning round further underscores the importance of both metals.

Retail Appetite and Hub Aspirations

Strong retail demand for jewellery and watches in China is evident in the robust sales figures reported by China Duty Free Group during the Spring Festival break, with a 23.7% jump in sales at its cdf Sanya duty-free complex in Hainan. This trend highlights the growing consumer appetite for precious metals, further fueling China’s ambitions to establish Hong Kong as a gold trading hub.

Challenges and Uncertainties

Despite the ambitious plans, establishing a credible gold hub in Hong Kong is not without its challenges. Refineries must adhere to stringent global standards, and the market requires genuine activity and liquidity. Offshore investors are closely scrutinising China’s capital controls and the potential impact of sanctions. Moreover, the government’s pronouncements on overcapacity and stockpiles have been vague, leaving room for uncertainty and potential surprises.

In the near term, Hong Kong faces critical questions: Will refiners relocate capacity to the city, and will foreign buyers embrace Hong Kong for bulk delivery and storage? For Beijing, the central question is whether investing in infrastructure will truly translate into greater influence over global benchmark prices. The success of China’s efforts to reshape the global commodities landscape hinges on addressing these challenges and navigating the complex interplay of market forces, geopolitical considerations, and regulatory interventions.

By Adebayo Durojaiye

Source: TMAStreet

Diversification with a heart of gold

Gold has shone brightly amid geopolitical uncertainty and shifting policy dynamics, drawing investors toward its perceived safety. We see it as an appealing, strategic diversifier in today’s environment.

Gold has played a central role in commerce, diplomacy and wealth preservation for millennia. From ancient Egypt to the Roman Empire, it has been used to signify power, settle international obligations and mint high?value currency.

Across the ages and immeasurable global changes, gold has retained its role as a universally recognised store of wealth. For modern investors, it remains a constant in an increasingly complex world.

At Coutts, we have re-introduced gold into our multi-asset discretionary investments through a modest, strategic allocation. Examining the precious metal through our Anchor and Cycle investment process – which blends long-term analysis with tactical agility – we found that even a small weighting could improve long?term outcomes. It has the potential to enhance portfolio robustness and help mitigate key market risks.

Powerful diversification

Over the past year, gold has undergone a dramatic appreciation against a backdrop of chronic uncertainty. Tariffs, geopolitical tensions and elevated government debt have all weighed on confidence.

Gold rose from around $2,600 per ounce in December 2024 to more than $5,500 per ounce last month – a new all?time high. Prices then softened amid some profit taking and the prospect of a new US Federal Reserve Chair who could favour higher interest rates. Prices remain volatile, but are still elevated by historical standards.

For us, however, gold’s true value lies less in short?term movements – which are often erratic (more on that later) – and more in its powerful diversification characteristics.

Past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can fall as well as rise and you may not get back what you put in. You should continue to hold cash for your short-term needs. This article should not be taken as advice.

Government bonds still best for recession risk

Gold should be viewed as part of the diversification toolkit. When it comes to hedging recession risk, we believe that high?quality government bonds remain the most effective instrument. Their relative security often makes them the warm, dry shelter investors flock to when economic storms brew overhead.

While recession is not our base case currently – our analysis shows the economy now in an expansion phase – it is prudent to be prepared should this change. Even though we don’t currently expect bonds to perform as well as equities over the coming months, we continue to hold them for this important reason.

Growth risks are not the only challenges investors face. Risks around geopolitics, inflation and fiscal sustainability are also significant – increasingly so in recent years – and we expect this to continue. This is where gold could shine as a diversifier.

Historically bonds and gold move in a different direction to equities. However, bond-equity correlations have increased in recent years due to elevated inflation and more uncertain central bank policy. Under these conditions, gold’s ‘safe haven’ status and low correlation to equities could become increasingly valuable.

Gold also has a long history of delivering positive returns during severe equity drawdowns, offering support precisely when investors need it most.

It is these characteristics – low correlations and a decent track record during periods of stress – that we examine to assess the value of any potential diversifier.

What’s next for gold?

Looking ahead, several structural tailwinds could continue to support gold.

Fiscal deficits across developed markets remain elevated. Within the G7, government debt?to?GDP ratios range from 64% in Germany to 237% in Japan, with six of the seven economies above 100%.

These dynamics raise periodic concerns about fiscal sustainability, contributing to bouts of volatility in government bonds. In such environments, investors may increasingly turn to gold as a diversifier.

A second tailwind is continued central bank buying. Since 2022, central banks have accumulated substantial quantities of gold as they seek to diversify reserves away from US dollar?denominated assets. While forecasting future purchases is difficult, we do not see this trend reversing.

Small that glitters…

Despite its ancient pedigree, gold remains a small financial market, which partly explains the price swings observed in recent months.

The World Gold Council estimates that around 219,890 tonnes of gold have been mined throughout history. But only about 90,000 tonnes are accessible to financial markets – bars, coins, exchange traded fund holdings and central bank reserves.

At an indicative price of $5,000 per ounce, this equates to a market value of roughly $14.5 trillion, compared to a global equity market of approximately $125 trillion and fixed income figure of around $145 trillion. 

Given gold’s smaller scale, even marginal changes in demand and supply can meaningfully influence price behaviour, making significant price moves more common than in other major markets.

Recent volatility illustrates this. Markets were surprised by President Donald Trump’s nomination of Kevin Warsh as US Federal Reserve Chair, as Warsh was perceived as potentially less inclined toward rate cuts than other candidates. The resulting strength in the US dollar contributed to a sell?off in gold.

This move was likely amplified by the Chicago Mercantile Exchange’s decision to raise margin requirements for gold futures – effectively increasing the collateral needed to open or maintain positions. Higher margin requirements make positions more expensive to hold and can prompt some investors to scale back or exit trades, amplifying price moves.

Strategic rather than tactical

Such episodes highlight why tuning out short?term market moves is important, but quite difficult. That is why we see gold as part of the Anchor element of our process (strategic, long term) rather than Cycle (tactical, short term).

We think modest strategic allocations could improve the robustness of portfolios or funds. But extreme, and sometimes opaque, price moves are a consequence investors must bear in exchange for improved diversification.

By Joe Aylott, Multi-Asset Strategist

Source: Coutts

Gold, Silver Stumble at the End of Best Year Since the 1970s

Gold and silver fell on the last trading day of 2025, though both remained on track for the biggest annual gain in more than four decades as a banner year for precious metals drew to a close.

Spot gold hovered around $4,320 an ounce, while silver slid toward $71. The two have seen exceptional volatility in thin post-holiday trading, plunging Monday before recovering Tuesday and dropping again Wednesday. The big swings prompted exchange operator CME Group to raise margin requirements twice.

Both metals are on track for their best year since 1979, supported by strong demand for haven assets amid mounting geopolitical risks and by interest-rate cuts by the US Federal Reserve. The so-called debasement trade — triggered by fears of inflation and swelling debt burdens in developed economies — has helped supercharge the scorching rally.

In gold, the bigger market by far, those factors spurred a rush by investors into bullion-backed exchange-traded funds, while central banks extended a years-long buying spree.

Gold is up about 63% this year. In September, it eclipsed an inflation-adjusted peak set 45 years ago — a time when US currency pressures, spiking inflation and an unfolding recession pushed prices to $850. This time around, the record run saw prices smash through $4,000 in early October.

“In my career, it’s unprecedented,” said John Reade, a market veteran and chief strategist at the World Gold Council. “Unprecedented by the number of new all-time highs, and unprecedented in the performance of gold exceeding the expectations of so many people by so much.”

Silver has notched up a gain of more than 140% during the year, driven by speculative buying but also by industrial demand. The metal is used extensively in electronics, solar panels and electric cars. In October, it soared to a record as tariff concerns drove imports into the US, tightening the London market and triggering a historic squeeze.

The new peak was then passed the following month as US rate cuts and speculative fervor drove prices higher. The rally topped out above $80 earlier this week — in part reflecting elevated buying in China.

Yet the latest move swiftly reversed, with the market closing down 9%  Monday then swinging the following two days. In response to the extreme volatility, CME Group again raised margins on precious-metal futures, meaning traders must put up more cash to keep their positions open. Some speculators may be forced to shrink or exit their trades — weighing on prices.

By Yihui Xie and Jack Ryan

Source: Yahoo

Morgan Stanley Says Gold Pullback Is a Buying Opportunity, Lifts Focus to 2026

The gold price ended the week at 4,219.53 dollars per ounce, up 1.35 percent, extending a strong run that has kept the metal well bid through late November. 

Prices have held firm after a series of volatile sessions, with last week’s moves ranging between 4,074 and 4,218 dollars, as investors continued to rotate back into precious metals.

Morgan Stanley calls gold its top pick across the commodities complex and expects the backdrop to stay supportive into 2026.

The bank points to a decisive shift in investor behaviour this year, with ETFs reversing four years of net selling and adding the largest tonnage since 2020.

It expects that demand to continue as interest rates fall, while central banks keep adding to reserves and jewellery consumption shows early signs of stabilising.

The bank says demand for real assets has also strengthened as investors reassess portfolio hedges against inflation risks and economic uncertainty.

With that backdrop in mind, Morgan Stanley views the latest dip in prices as an entry point and holds a mid-2026 forecast of 4,500 dollars per ounce.

Risks include further bouts of volatility that could divert flows to other asset classes, or any shift by central banks toward reducing reserves.

Silver is also on Morgan Stanley’s radar, with the market likely to remain in deficit and prices expected to stay close to record territory.

By Dave Taylor

Source: Exchange Rates UK