•The Hong Kong dollar's trading range is set between 7.75 and 7.85 against the US dollar.
•Hong Kong’s rise in global gold trade will also impact the market. First, it could increase the demand for gold, which could drive up prices.
Image: COURTESY
Dubai is no longer the world's leading hub for Russian gold trading, thanks to the rise of Hong Kong, Bloomberg reports.
Data from Refinitiv Liva, shows that Hong Kong imported a record Sh348 billion ($2.3 billion) worth of gold from Russia in the first eight months of 2023.
This is Sh59 billion more than the Sh289 billion ($1.9 billion) worth of gold imported from Russia in the same period last year.
Since January, there has been a steady rise in gold shipments from Russia, peaking at 14 tonnes in August.
In total, Hong Kong imported 68 tonnes of Russian gold for the eight months under review. This is four times more than the whole of 2022.
This trend, Bloomberg reports, is attributable to US sanctions on Russia’s top gold miners, as well as a crackdown by the United Arab Emirates on illicit activities in its bullion market.
But the rise of Hong Kong as a hub for Russian gold trading was also fueled by the fact that the Hong Kong dollar is pegged to the US dollar, which makes it a more attractive currency for Russian gold sellers than the UAE dirham.
The Hong Kong dollar's trading range is set between 7.75 and 7.85 against the US dollar.
Second, Hong Kong has a strong financial system and a well-developed gold market. Third, Hong Kong has a long history of trade with Russia.
The increase in Russian gold trading through Hong Kong is likely to have a number of implications on Russia.
First, it could help to prop up the Russian economy, which has been struggling under the weight of Western sanctions.
Again, it could make it more difficult for Western countries to enforce sanctions on Russia. However, it could raise concerns about money laundering and other illicit activities.
What it means for the global gold market
Hong Kong’s rise in global gold trade will also impact the market. First, it could increase the demand for gold, which could drive up prices.
Second, it could make the gold market more volatile, as it could be more susceptible to geopolitical events.
Again, it could raise concerns about the transparency of the gold market, as it could be more difficult to track the origin of gold.
With a new destination on top of Russia’s gold sales, the global financial system will also feel the change and it will be critical to monitor this landscape closely in coming months to assess its full impact.