Gold hub

A complete gold value chain in one jurisdiction is Hong Kong’s prize to claim – and a strategic opportunity every bank must now consider

The centre of gravity in global gold markets is shifting towards Asia, yet no city in the region currently offers the full infrastructure of a complete gold centre. In our view, Hong Kong has both the ambition and the attributes to fill that gap, and the building blocks are already being laid. But realising the full opportunity will require sustained investment in the clearing infrastructure, digital capability and talent, as well as close collaboration between regulators, banks and the wider market.

China and India together account for more than half of global physical gold coin and bar demand — a figure that reached a 12-year high in 2025, generating a record value of USD154 billion¹. At the same time, the emergence of tokenised gold points to a market that is becoming not only larger but more sophisticated in how the asset is held, traded and financed.

Building a front-to-back value chain

The single most important differentiator available to Hong Kong is the ability to offer a complete, front-to-back gold value chain within one jurisdiction – from the intake of unrefined metal, through accredited refining, to vaulting, clearing and ultimately financialisation. In our view, no other centre in Asia is better positioned to do this.

One of the most striking inefficiencies in today’s gold market is the absence of a vertically integrated value chain in Asia. Switzerland currently supplies approximately one-third of refined gold worldwide². Critically, much of the gold mined across Asia-Pacific — including from Australia and China— is routed through Swiss refineries before being shipped back to Asia for end use. This circuitous route adds cost, time and complexity — including insurance, logistics, documentation, and carbon emissions — that could be substantially reduced if processing took place closer to the source of demand. Recent trade tensions including the United States’ imposition of a 39% tariff on Swiss imports in 2025³, have also highlighted the fragility of global supply chains that rely too heavily on any single refining hub.

Hong Kong has begun to address this directly, and infrastructure is being developed to support a significant expansion of gold trading, refining and storage with government support including tax incentives⁴. China’s biggest courier plans to open a vault near the city’s airport in 2026⁵, while a major Chinese refiner, is planning to invest USD150 million to expand its footprint in Hong Kong including a facility that’s scheduled to begin production in 2026.

More importantly, the establishment of the Hong Kong Precious Metals Central Clearing Company (PMCC) with connectivity to the Shanghai Gold exchange is a critical step in the city’s gold hub strategy. The PMCC is expected to become operational in the second half of 2026 and will support over-the-counter spot gold settlement through unallocated accounts, mirroring the mechanism that underpins London’s role in wholesale bullion trading⁶.

This development is significant because clearing is essential to market depth. Without an effective institutional settlement layer, Hong Kong will struggle to attract the liquidity needed to become a true regional pricing centre. Broad participation from banks, bullion dealers, brokers, refiners, logistics providers and institutional investors will therefore be critical. Hong Kong has also invited a number of central banks with ties to China’s Belt & Road project to participate, targeting flows arising from government reserves activity alongside commercial activity.

A liquid futures market will also be important. Futures contracts allow market participants to hedge price risk, establish real-time benchmarks and attract additional liquidity from institutional and speculative investors. Hong Kong’s capital markets, combined with its role in supporting two-way financial flows with the Chinese Mainland, provide a strong platform to develop this capability and will help Hong Kong move beyond being a transit hub for physical gold flows and become a centre with genuine regional price-setting influence.

Jianing Song

Head of Banking and Capital Markets, Hong Kong SAR

KPMG China

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Paul McSheaffrey

Senior Banking Partner, Hong Kong SAR

KPMG China

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From infrastructure to franchise: five use cases for banks

Infrastructure alone does not create a market; banks do. As the physical and clearing layers take shape, we see five concrete ways in which banks operating in Hong Kong can convert the gold hub build-out into durable franchises.

1. Financing the build-out itself

The expansion of refining capacity, vaulting infrastructure and secure logistics represents a significant capital investment cycle in its own right — and one that banks are naturally positioned to fund. Beyond conventional project and equipment finance for refinery construction and vault development, the sector generates ongoing demand for specialised working-capital solutions: inventory finance for refiners holding metal through the processing cycle, tolling and consignment structures that allow refiners to operate without owning the gold they process, and trade finance for the import of doré and unrefined metal from producing markets across Asia-Pacific. As the value chain localises, the financing of that value chain localises with it — and banks that build sector expertise early will set the terms of a lending market that barely exists in Asia today.

2. Resolving provenance and responsible-sourcing risk through DLT and tokenisation

One of the most persistent compliance challenges in gold banking is upstream: verifying the origin of metal and demonstrating that it has not been associated with conflict financing, environmental harm, money laundering or sanctioned entities. These obligations — embodied in responsible-sourcing frameworks and supervisory expectations on financial crime — have historically relied on paper-based chain-of-custody documentation that is fragmented, slow and difficult to audit. A Hong Kong ecosystem built from the ground up offers the chance to do this differently. Distributed ledger technology can create a tamper-evident digital record for each bar from mine intake through refining, assay, vaulting and ownership transfer, giving banks a verifiable provenance trail rather than a documentary assertion. Tokenisation extends this further: a token backed by allocated metal can carry its provenance data with it, meaning that responsibly sourced gold becomes not just a compliance outcome but a tradeable product attribute. For banks, the prize is twofold — materially lower compliance and reputational risk in physical gold business, and the ability to offer institutional and wealth clients tokenised gold whose backing is verifiable at bar level.

3. Connecting wealth demand to institutional liquidity

Asia’s private banking and wealth management clients are among the world’s most consistent buyers of gold, across physical holdings, accumulation programmes, discretionary mandates and structured products. Today, much of that demand is hedged and sourced through London, with the associated time-zone, settlement and cost frictions. A local clearing and settlement layer changes the economics: banks can net wealth-driven client flow against their institutional market-making books within Hong Kong’s own infrastructure, in Asian hours. The result is a virtuous circle — private wealth demand deepens the institutional liquidity pool, deeper liquidity produces tighter bid-offer spreads and lower hedging costs, and tighter pricing in turn makes gold products more attractive to wealth clients. Banks that combine a meaningful wealth franchise with institutional trading capability are best placed to capture this internalisation benefit, but the spillover — a deeper, cheaper loco-Hong Kong market — accrues to all participants.

4. Gold-backed financing and collateral mobility

Once allocated and unallocated balances exist at scale within a Hong Kong clearing framework, gold becomes usable collateral in the local market. This opens several lines of business: lending to wealth clients against allocated holdings, securities-financing-style gold lending and leasing to refiners, jewellers and traders, and ultimately the development of a local gold lease-rate curve — a missing piece of Asian market infrastructure that today references London. Banks that provide early balance-sheet support to a loco-Hong Kong leasing market will not only earn the associated spread but help establish the reference rates around which the regional market prices.

5. Multi-currency and offshore renminbi product innovation

Hong Kong’s unique connectivity to the Mainland — through the PMCC’s link to the Shanghai Gold Exchange and the city’s role as the leading offshore renminbi centre — allows banks to manufacture gold products denominated in CNH and linked to Mainland market dynamics, for distribution to international clients who cannot access onshore markets directly. Dual-currency gold structures, CNH-denominated gold deposits and hedging solutions for corporates with renminbi gold exposure are all products that can be built credibly only in Hong Kong. This is a genuinely differentiated capability relative to any other regional centre.

Taken together, these use cases illustrate the central point: the gold hub is not a single business opportunity but an ecosystem of interlocking ones — and the banks that benefit most will be those that engage across several layers of the value chain rather than one.