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Morning Edition · Wednesday, September 16, 2026Published at 1:10 AM EDT · New York
Hong Kong Says It May Buy Gold With Its Exchange Fund as It Publishes a First Five-Year Plan
Chief Executive John Lee raised the prospect on the same day gold traded near 4,263 dollars an ounce, a six-week low according to USAGOLD, ahead of the Federal Reserve decision.
Hong Kong's chief executive, John Lee Ka-chiu, said the territory may use the Exchange Fund to buy gold, a remark he made alongside the release of the city's first five-year development plan on Wednesday. The South China Morning Post reported the comment as part of the plan's presentation to the legislature, which the government had announced in August as a document covering economic and social development from 2026 to 2030.
The Exchange Fund is the reserve pool managed by the Hong Kong Monetary Authority, and it exists primarily to back the Hong Kong dollar's peg to the United States dollar. Allocating part of it to bullion would change what the city holds behind that peg, not merely adjust a trading position. This would follow a series of earlier policy steps moving in the same direction. Lee has previously committed the territory to building gold storage capacity of more than 2,000 tonnes and a central clearing system for gold transactions, and the financial services bureau signed a cooperation agreement with the Shanghai Gold Exchange in January.
The announcement comes as the metal has weakened. USAGOLD reported that gold traded at about 4,263 dollars an ounce on Tuesday, down 1.23 percent and at a six-week low, as a strengthening dollar and the prospect of a Federal Reserve rate increase made the metal less attractive to buyers. Silver fell 0.68 percent to about 62.82 dollars, well below the level it reached in late January.
The divergence between short-term price movements and long-term official policy is the more significant point here. Rate expectations move the gold price day to day, because bullion pays no interest and a higher real interest rate raises the cost of holding it. Reserve managers operate on a much longer time horizon. A jurisdiction that pegs its currency to the dollar and is now considering holding gold behind that peg is making a statement about what it wants to hold if the dollar-based financial system comes under strain, and that decision does not reverse because the metal fell 1 percent.
What this means
Central banks and sovereign funds that buy gold create demand that does not respond to price the way investor flows do, which absorbs supply even during selloffs driven by rate expectations. If Hong Kong follows through, it adds another official buyer to a group already led by Asian and Global South reserve managers, and it deepens the physical trading and storage infrastructure Hong Kong is building alongside Shanghai. Over time, what loses out is the exclusive role of dollar-denominated assets in official reserves, and that shift toward a more multipolar monetary system happens slowly, through custody, clearing and storage decisions rather than through announcements.
What to watch
- Whether the Hong Kong Monetary Authority publishes an actual allocation target or timetable for gold, which would turn a statement of intent into measurable demand.
- Quarterly official-sector gold purchase data, because it shows whether the current price weakness is slowing reserve buying or being absorbed by it.
- How gold trades in the days after the Federal Reserve decision, since a recovery despite a rate increase would indicate buyers are responding to something other than interest-rate differentials.
Observations to monitor, not financial advice.
Synthesized from: South China Morning Post · Hong Kong Government · USAGOLD · China Daily
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Comments
1Sep 16, 5:10 AM · edited
Backing the HKD peg with gold would expose reserve adequacy to fluctuations in bullion's dollar price, because the fund's liabilities are fixed in dollar terms while its gold holdings would not be.