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With this week’s spike in the price of gold, I am puzzled over the lack of media coverage regarding Hong Kong’s recall of their physical gold, held in London, to relocate the yellow metal to their newly built depository vault, at Chek Lap Kok Airport.

What, if any, is the short-term financial impact, and longer-term the strategic implications, of this new regional hub? How odd that none of the business news channels offered any concrete answers for the rise to $1,000 in volatile trading.

So far, the only major news outlet, Market Watch, gave any visibility to this story with these quotes:

"Having a central government-sponsored vault would create a situation where you could conceivably look at Hong Kong as being a hub, where metal could be traded for the region," said Sunil Kashyap, managing director at Scotia Capital in Hong Kong, adding that the facility was the first with official government backing in the region.

The 3,660-square-foot depository, located at the city's main Chek Lap Kok Airport, will serve as a "storage facility for local and overseas government institutions," according to the government statement.

Martin Hennecke, a financial advisor with the Hong Kong-based Tyche Group Ltd., said that could be appealing to regional central banks unnerved after watching the global financial system teeter on verge of implosion last year.

Did the excruciating experience from the market meltdown of 2008 hasten China’s decision to take control of their assets and offer their region an alternative to western locations? Going forward, how might Hong Kong compete with western precious metals-based financial products?

Marketing efforts will be launched to convince Asian central banks to transfer their gold reserves to the Hong Kong facility, according to reports citing Raymond Lai, finance director with the Hong Kong Airport Authority.

Efforts will also be made to reach out to commodity exchanges, banks, precious-metals refiners and ETF providers, the reports said.

Management firm Value Partners planned to launch an ETF gold fund that will use Hong Kong instead of London as a repository for the gold backing the fund, local reports said Thursday.

Are we watching an old-fashioned short squeeze rally in gold? If so, who was previously selling bullion that they did not own?

Disclosure: No positions

Source: Hong Kong Recalls Gold Reserves: Why No News Coverage?