To mark the beginning of the cross-border gold trading, he said 12 exchange gold trading members would buy a combined two tonnes of gold - one tonne from the Shanghai Gold Exchange main board and the rest from its international board.

The price would be determined on site but Cheung said he believed it could worth about 200 million yuan (HK$252.9 million).

The tie-up, which has been planned for a year and recently approved by the mainland authorities, will allow members of the local gold bourse to trade in the two markets of Shanghai Gold Exchange.

Mainlanders, however, are not allowed to trade in the local bourse, Cheung said.

"We have not yet come to the stage to let mainlanders trade here. Let's take the step for Hong Kong traders to trade in Shanghai first," he said.

"The linkage would encourage cross-border trading and help Shanghai Gold Exchange to expand its investor base by having more Hong Kong investors trading there. It is important for the internationalisation of the mainland gold market and the internationalisation of the yuan," Cheung said.

"This also strengthens Hong Kong's role as a gateway to invest in the mainland market," he said.

The tie-up with the Hong Kong gold bourse will mark another important step in developing its gold market. The country launched an international gold exchange in the Shanghai Free-Trade Zone in September.

Although mainland China is the largest physical gold consumer in the world, its financial infrastructure lags that of Singapore and Hong Kong in handling a gold market.

The Chinese Gold and Silver Exchange Society, which completed 105 years yesterday, was set up during the Ching dynasty and is open for both international and local gold investors.

Many of its end users are jewellery manufacturers or retailers such as Chow Tai Fook and Chow Sang Sang, as well as gold investors.