Gold trading in Hong Kong sees positive debut for Year of the Rooster

PUBLISHED : Wednesday, 01 February, 2017, 9:27am
UPDATED : Wednesday, 01 February, 2017, 10:09pm

Hong Kong’s gold market rose on its debut in the Year of the Rooster to close at HK$11,192 a tael up 0.9 per cent from Friday’s close as investors flocked to gold as a safe bet amid market worries over US President Donald Trump’s new immigration policy.

Local gold resumed trading on Wednesday at the Chinese Gold and Silver Exchange Society after a four-day holiday for the Lunar New Year which saw international gold rally by 0.5 per cent this week to trade at US$1,200.70 on Tuesday night, up 0.8 per cent from Friday after Trump issued an executive order banning immigrants and refugees from seven Muslim-majority countries.

“The US and global stock markets have fallen after the new US president’s policies. There are many political uncertainties ahead of the Year of Rooster as there will be many presidential elections in Europe in the following months. When stock markets are full of uncertainties, investors would choose to invest in gold,” said Haywood Cheung, president of the Chinese Gold and Silver Exchange Society in an interview with the South China Morning Post.

Cheung expects international gold prices could reach US$1,450 per ounce in the first quarter and may rise further to US$1,600 per ounce in the second half, which would represents a rally of 33 per cent.

“Gold prices rose by 8 per cent in the year of Year of Monkey as it was full of black swan events from Brexit to Donald Trump’s becoming president. The turnover of the local gold market also rose to between HK$80 billion to HK$100 billion a day. The Year of Rooster is likely to continue this trend,” he said.

Local gold last traded at HK$11,092 per tael on Friday, the last trading day of Year of the Monkey while international gold last traded at US$1190.39 on Friday.

Cheung, together with undersecretary for Financial Services and the Treasury James Lau, hosted the ceremony for the debut trading day on the local gold exchange, which is the only market in Hong Kong to still use open outcry, a traditional method where traders gather to yell out prices and use hand gestures to make trades.

The exchange on Wednesday morning also had a ceremony for the addition of three accredited gold refineries.

It is time for Hong Kong to revive its golden days as an international gold trading centre
Haywood Cheung, Chinese Gold and Silver Exchange Society

The local gold exchange, which started trading in 1910, has 171 gold trading members which include 32 that have accredition to make physical gold bars.

Cheung said among the 32 gold refineries, half of them were not active. But last year three other members purchased the accredition qualification from these inactive members to obtain the qualification to make physical gold bars.

“This is a positive sign that there are increasing numbers of customers wanting to have gold bars for collection or as investment. The growing number of Chinese middle class is going to increase the demand of physical gold. This has attracted more traders to come here to issue gold bars,” he said.

Cheung said the refineries would all need to follow the strict standards set by the exchange to make their gold bars.

“They need to make sure their gold bars meet the size, weight and purity according to the standards of the exchange,” he said.

“With China becoming the world’s largest gold consumer, we have seen an increasing number of gold traders from Switzerland, Australia and South Africa move to Hong Kong. Our members have seen their gold trading increase substantially this year as the volatile markets led more investors to buy gold as a safe haven,” he said.

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The Chinese Gold and Silver Exchange Society has set up an office in Qianhai and it is also planning to set up a gold vault in the special economic zone next to Shenzhen.

“With the future expansion plan in Qianhai, Hong Kong is going to regain the position as the leading gold trading centre worldwide,” he said.

Hong Kong was among the top gold trading centres in the 1980s but that position went into decline after gold trading turned quiet in the 1990s.

Cheung said there were several thousand gold jewellery factories in Shenzhen that would benefit from the facilities in Qianhai. “It is time for Hong Kong to revive its golden days as an international gold trading centre,” he said.