Gold, a new home

At risk of sounding like a gold bug:

Hong Kong is pulling all its physical gold holdings from depositories in London, transferring them to a high-security depository newly built at the city’s airport, in a move that won praise from local traders Thursday.

The facility, industry professionals said, would support Hong Kong’s emergence as a Swiss-style trading hub for bullion and would lessen London’s status as a key settlement-and-storage center.

“Having a central government-sponsored vault would create a situation where you could conceivably look at Hong Kong as being a hub, where metal could be traded for the region,” said Sunil Kashyap, managing director at Scotia Capital in Hong Kong, adding that the facility was the first with official government backing in the region.

The Hong Kong Monetary Authority, which functions as the territory’s unofficial central bank, will transfer its gold reserves stored in other vaults to the depository later this year, the Hong Kong government said in an earlier statement.

The monetary authority reported $63 million in physical gold reserves as of July 31, according to its International Reserves and Foreign Currency Liquidity statement. The authority wouldn’t disclose where the reserves are held, but local media reports cited gold traders as saying that London’s the most likely location.

Traders said the new depository facility could also foster new financial products, such as exchange-traded funds based on precious metals.

The 3,660-square-foot depository, located at the city’s main Chek Lap Kok Airport, will serve as a “storage facility for local and overseas government institutions,” according to the government statement.

Marketwatch

And the actual Xinhua article:

The 340-square-meter depository would be used to provide secure storage and physical settlement services to central banks, commodity exchanges, bullion banks, precious metal refineries and issuers of exchange traded funds.

In addition to safety and security, it will help reduce transportation costs and settlement risks for precious metals including gold, silver, platinum and palladium.

The Monetary Authority is planning to transfer its physical gold reserves stored at other vaults to the depository later this year, the HKSAR government said. The Airport Authority and the Mercantile Exchange also signed an agreement Wednesday requiring all clearing members of the exchange to keep gold-bar stock at the depository.

Xinhua

Hong Kong central bank’s (the HKMA) actual gold reserves are insignificant (though her motherland’s gold holdings -official reserves + SOE holdings- are massive). But the true implications of the action above are far greater.

Singapore has some gold reserves (a respectable schooner in a sea of VLCC behemoths and ‘Malaccamax’ leviathans); where does Spore keep its little pot of gold?

Sources:
[1], [2], [3]

4 thoughts on “Gold, a new home

  1. $63 million?? Is that a tenth of a cubic meter of gold? They built a 3,660-square-foot depository for storing 3 cubic feet of metal?

  2. And using HK as a giant ‘petri dish’ for the viral renminbi experiment:

    Renminbi goes viral`

    “If you want to see capitalism in action,” said Milton Friedman, “go to Hong Kong.” Beijing is taking him up on that. As it seeks to broaden ownership of its currency, China is using the special administrative region as a giant petri dish. It wants to observe how this profoundly consumerist culture absorbs the renminbi as a medium of exchange, as a store of value and as a unit of account.

    http://www.ft.com/cms/s/3/62242cd4-176b-11e0-badd-00144feabdc0.html#axzz1Ajyp9yRU

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