Hong Kong Launches Yuan-Denominated Gold Futures Contract

Hong Kong is positioning itself as an international gold hub through various measures announced over the past week. A key development is the planned launch of a yuan-denominated gold futures contract by Hong Kong Exchanges and Clearing (HKEX) early next year. This move aims to advance two priorities outlined in the city's five-year plan: promoting yuan internationalization and developing Hong Kong's gold market.

According to HKEX managing director Gregory Yu, the new contract will be launched in addition to the reactivated US dollar-denominated gold futures contract. The government-owned clearing system mirrors the financial infrastructure used by the London Bullion Market Association (LBMA) in London, and a new gold price ticker, HAU, has been introduced.

The Hong Kong government is also expanding yuan settlement of payments for mainland Chinese services and increasing its gold portfolio through the Exchange Fund. The region's banks and suppliers are incentivized to maintain yuan accounts, payment services, and liquidity by making regular yuan payments. Additionally, tax reforms will slash the profits tax rate for qualifying commodity traders from 16.5% to 8.25% by 2027.

Gold is flowing into Hong Kong, with 107 tonnes entering the region in July, up from 72.16 tonnes in February. The World Gold Council has noted a shift of the gold market's 'center of gravity' towards the East, driven by emerging market economies and Chinese gold investment.