Hong Kong's Gold Market Reforms Shift Price Discovery to Asia

• Spot gold fell 0.9% to $4,126.31/oz as a stronger dollar and a two-week high in the US 10-year Treasury yield reduced demand for non-yielding assets. Traders priced a 56% probability of a September Fed rate hike, down from more than 60% after weaker US jobs data reduced expectations for tighter monetary policy.
• Hong Kong launched a central gold clearing system, revived dollar-denominated gold futures, and introduced Delivery Connect with the Shanghai Gold Exchange to expand regional gold trading. The initiative targets gold storage above 2,000 metric tons by 2030.
• Asia trading sessions returned 12.97% year to date through June 26, while US sessions returned -15.08%, showing that Asian trading accounted for more of gold's price gains.
• Under the WGC's base-case scenario, gold trades within ±5% of $4,100/oz in H2 2026. The upside scenario targets $4,500/oz or higher, while $3,860/oz is the key technical support level.
• A 25-basis-point decline in the US 10-year Treasury yield increases gold prices by 1.75%, while a 100-point rise in the Geopolitical Risk Index increases gold prices by 2.5%.

Dollar Strength & Higher Treasury Yields Weigh on Gold

The WGC's Gold Return Attribution Model showed that the July 7 pullback followed the same trading pattern seen throughout H1 2026. Through June 26, Asia trading sessions returned 12.97% year to date, while US sessions returned -15.08% and Europe returned -1.32%, indicating that most buying occurred during Asian trading hours. 

Gold remained about 7% lower year to date despite reaching 12 record highs in H1 2026, climbing to an intraday high of $5,595.47/oz before falling to an intraday low of $3,959.33/oz, a peak-to-trough swing of more than 35%. WGC analysis showed that rebounds were concentrated during Asian trading hours, while most pullbacks occurred during US trading.

Hong Kong Gold Market Reforms Expand Asian Price Discovery

Hong Kong launched a central gold clearing system, introduced a Delivery Connect program with the Shanghai Gold Exchange, and advanced plans for yuan-denominated gold futures to expand regional gold trading and strengthen Asia's role in gold price formation. 

The yuan-denominated futures contract supports Hong Kong's plan to increase gold storage capacity more than tenfold to over 2,000 metric tons by 2030, strengthening its position as a regional trading hub.

China's Yuan Policies Strengthen Asian Gold Markets

A yuan-denominated gold futures contract would give producers with Asian operations a non-dollar pricing benchmark, reducing their exposure to US rate-driven price swings that contributed to the 15.08% decline during US trading sessions. 

Hong Kong Chief Executive John Lee announced tax incentives for gold trading and settlements, while the PBOC expanded Hong Kong's yuan liquidity facility to 500 billion yuan. These measures support regional gold trading regardless of the Fed's near-term policy decisions.

Asian Gold Demand Reshapes Producer Valuations

Valuing North American gold producers primarily on US real rates reflects the US trading session, which returned -15.08% year to date, but does not capture the 12.97% gains generated during Asian trading sessions. 

Producers with yuan-denominated offtake agreements or access to the Shanghai Gold Exchange through Hong Kong's Delivery Connect program benefit from Asian dip-buying that may not be reflected in valuation models based primarily on US interest rates.

Fed Rate Outlook Tests Gold's $3,860 Support

CME FedWatch priced the probability of a September Fed rate hike at 56%, down from more than 60% after weaker US jobs data. The Fed's June meeting minutes are the next key indicator for interest rate expectations. 

Gold's ability to hold the WGC's H2 2026 base-case target of $4,100/oz depends on whether prices remain above $3,860/oz and whether the Fed minutes support lower rate expectations.