Hong Kong expands cross-border gold market with China, with 900 kilos of gold traded in Shenzhen

Nine hundred kilogrammes of gold, worth 244.44 million yuan (US$36.88 million) changed hands on Friday evening, kicking off Hong Kong’s second cross-border market with mainland China under the so-called Gold Connect programme.

The first trades under the Hong Kong-Shenzhen Gold Connect were made after a ceremony hosted by Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor and Haywood Cheung Tak-hay, president of the Chinese Gold & Silver Exchange Society.

Under the scheme, mainland Chinese investors can authorise any of the 70 Hong Kong dealers located at the Qianhai special economic zone in Shenzhen to buy and sell gold bullions, and settle the transactions in cash or by physical delivery. The bullions are designated as one-kilogramme gold bars.

The Gold Connect is the city’s second such trading scheme after a link-up between Hong Kong and the Shanghai market in 2015. The new link with Shenzhen has 70 Hong Kong participating dealers, more than double the 30 who signed for the Shanghai-Hong Kong Gold Connect.

“The new Gold Connect, which starts tonight, as well as the gold vault in Qianhai, will help gold traders save time and money settling gold trades,” Chief Executive Lam said. “This will benefit both Hong Kong and mainland gold traders and investors.”

Lam added the new scheme would create closer ties between Hong Kong and Qianhai and credited the local gold bourse’s efforts to tie up with gold exchanges in Dubai, Singapore and Myanmar.

The proposed gold vault will commence operation in April, and be able to store 1,500 tonnes of gold, allowing mainlanders who trade the metal in Hong Kong via Qianhai, and gain physical delivery.

“The new connect will boost the internationalisation of the yuan. The Shanghai Connect has already benefited international investors to trade gold in the mainland,” said Cheung of the dealers’ guild. “The new Shenzhen leg will make it easier for 2,000 jewellery makers to trade gold in Hong Kong.”

While the Shanghai link only allows Hong Kong investors to trade on mainland city’s gold exchanges, the Shenzhen link now allows mainlanders to trade in Hong Kong.

This is different from the two Stock Connect schemes that linked up share markets in Hong Kong and Shanghai in 2014, and Shenzhen last year – both allow northbound and southbound trading.

Gold prices traded in a narrow range on Friday, below the previous session’s high, as the US dollar steadied amid caution ahead of jobs data later in the day.

Spot gold was mostly unchanged at US$1,275.82 per ounce at 6.57 am GMT, and was on track for its first weekly gain in three. It hit its highest in about two weeks at US$1,284.10 per ounce in the previous session.

This story has been corrected to reflect the actual transaction figure on Friday night.