Every crisis presents an opportunity. Thanks to the war in the Middle East, Hong Kong has, unexpectedly, turned into a safe harbour for the trading and storage of gold and industrial metals. The city had already been positioning itself as an international gold hub, leveraging its financial infrastructure to meet growing demand for safe-haven assets. But the war has driven home how well suited Hong Kong is to becoming an alternative to Dubai, the world’s second-largest gold trading hub.

Meanwhile, mainland Chinese and other Asian manufacturers importing copper, aluminium and other industrial metals are increasingly turning to Hong Kong as a secure base for stable supplies. One reason is their need to tap into the city’s financial markets to hedge against price volatility driven by geopolitical tensions such as from the Iran war.

Suddenly, demand for storage is outstripping supply. Manufacturers and traders need Hong Kong to expand its warehousing capacity and want to make greater use of its hedging tools to manage risks. That is something to which the local government needs to pay special attention, according to Clara Chan Yuen-shan of the Federation of Hong Kong Industries.

The London Metal Exchange, a subsidiary of Hong Kong Exchanges and Clearing (HKEX), operates 15 local warehouses, storing roughly 24,000 tonnes of non-ferrous metals as of March. Though a big jump from about 8,000 tonnes in 2024, local capacity still can’t meet client demand.

Since the start of the war, gold imports and trading have surged in Hong Kong due to merchants and investors from the Middle East and Russia moving their holdings from Dubai. Some Middle Eastern gold merchants have had to sell physical gold in Hong Kong at a steep discount to offload their inventories, making the city a bargain-hunting hotspot. Some from Dubai are selling gold directly in the city.

Hong Kong’s Financial Services and Treasury Bureau is working with cities in the Greater Bay Area to increase the supply of international-standard gold to be traded and stored locally. Airport Authority Hong Kong and financial institutions are expanding facilities that could exceed 2,000 tonnes in total storage capacity.