IIBX Director Somasundaram outlines how Asian bullion initiatives impact gold market

In Chennai, P. R. Somasundaram, a Director on the Board of the India International Bullion Exchange (IIBX), has highlighted how new initiatives by China and Hong Kong to build a comprehensive bullion ecosystem could reshape global gold markets. The initiatives aim to establish Asia as a major global gold hub by launching gold trading, clearing, storage, and price discovery systems.

Currently, London and New York dominate global gold trading and price discovery, even though Asia accounts for the largest share of global gold consumption and imports. Despite representing nearly half of global gold consumption, India and China remain primarily consumers rather than suppliers of gold. Global supply continues to be dominated by Western-based miners, refiners, and bullion banks.

According to Somasundaram, Hong Kong's latest initiative is designed to replicate London's established over-the-counter gold market infrastructure. The new system features central clearing, a central ledger, unallocated gold accounts, a proposed delivery link between Hong Kong and Shanghai, and plans for a Hong Kong gold reference price.

However, Somasundaram cautioned that these developments would not cause an overnight shift in global gold markets. He noted that London's dominance was built over decades through central bank vaulting, deep liquidity, and market trust. Asia's influence on price discovery will remain limited until its financial markets develop deeper liquidity and stronger futures participation.

The new system is expected to improve liquidity in Asia, enhance financing options, and reduce premiums over time. US interest rates, the strength of the dollar, central bank purchases, and ETF flows will continue to be the primary drivers of gold prices, while Asia's physical demand will make markets more efficient.

For India, the infrastructure could present new opportunities. If Hong Kong's system lowers transaction costs and narrows import premiums, Indian bullion importers could increasingly source gold through Hong Kong, alongside existing hubs like Dubai and Switzerland.

Somasundaram added that India's own International Bullion Exchange shares similar objectives. However, the domestic exchange must first establish itself as the primary gateway for India's gold imports before emerging as a global trading centre.

For everyday consumers, greater competition among bullion exchanges could bring transparent price discovery, reduced transaction costs, and clearer benchmark prices for both buying and recycling gold.