Hong
Kong to bring its gold reserves back home, and what that means
for London
Author: Geoff Candy | Thursday , 03 Sep 2009
The
unveiling of a new precious metal depository at Hong Kong
International airport could see the beginning of a new challenger
to London's dominance of the yellow metal
Wednesday's unveiling of the new precious metal
depository at Hong Kong International Airport made very few
ripples on the global news agenda. But, the implications of
the development are much more far-reaching.
According to the Xinhua news wire service, the 340-square-meter
depository will 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."
The report adds, in addition to the safety and security elements
of the new depository, having it based in Hong Kong will,
"help reduce transportation costs and settlement risks
for precious metals including gold, silver, platinum and palladium."
And, if that wasn't a clear enough, John Tsang, Hong Kong
Special Administrative Region (HKSAR) Government Financial
Secretary was quoted as saying, the depository, "will
enable Hong Kong to tap into opportunities from the growing
demand for gold and other commodities in the region,
"The opening of the depository tied in with the HKSAR
government's policy to enhance Hong Kong's position as an
international financial and logistics center," he added.
Had such an announcement happened at the peak of the financial
sector froth, it would have raised few eyebrows but, the timing
of the unveiling, just as central banks are fondly returning
to gold as a store of wealth and, especially in the East,
looking skeptically at the West's ability to store wealth,
is nothing short of spectacular.
Especially when one considers reports that the Chinese government
is vigorously promoting bullion ownership to its over 1 billion
citizens - someone would, after all, have to take physical
possession of much of that metal.
Also, the news that Hong Kong is now positioning itself as
an "international financial and logistics center"
backed, as it were by the suddenly obvious economic strength
of China should have a few Western bankers and vault owners
sweating even more than they were already.
Especially as, according to Xinhua, the Hong Kong Monetary
Authority "is planning to transfer its physical gold
reserves stored at other vaults to the depository later this
year
"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,"
it added.
But while the news didn't make major headlines, traders in
Hong Kong are very excited by the prospect, as MarketWatch's
Chris Oliver writes, "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."
If nothing else, Western vaults lose the holding fees associated
with the roughly $63m in physical reserves the monetary authority
has. But, a far more far reaching result would be the emergence
of Hong Kong, as a new hub for metal trade, very closely linked
to a country that stands soon to become not only a massive
economic super power but also overtaking India to become the
biggest consumer of physical gold.