Sifting through shifts in Asia Pacific gold trading

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Khushil Nathoo: Hello and welcome to J.P. Morgan's Making Sense. I'm Khushil Nathoo from the FICC market structure and liquidity strategy team. In today's episode, we are going to explore gold trading across the Asia Pacific region, a market experiencing record volumes, shifting market participation dynamics, and a wave of infrastructure developments that has a potential to shape where and how gold is traded. To unpack all of this, I'm pleased to be joined by my J.P. Morgan colleague, Ravi Ramakrishnan, Asia's senior precious metals trader. Ravi, thank you for being here.

Ravi Ramakrishnan: Thanks, Khushil, it's great to be here.

Khushil Nathoo: Ravi, let's start with the broader picture. According to the World Gold Council, average daily gold trading volumes for 2026 are running at roughly $510 billion compared to $370 billion last year. We have seen eight out of the top 10 trading days occur in January and February this year, while prices have surged to all-time highs above $5,400 per ounce. Now, at the time of this recording, mid-July, we have seen that move down closer to $4,000 per ounce. That's been quite a shift. From your observations, what dynamics are driving this level of heightened volatility and general activity?

Ravi Ramakrishnan: Yeah, volatility and trading volumes tend to go hand in hand. And, you know, we have seen some of the most volatile periods in the gold market in the last 12 to 18 months. This has happened pretty much alongside record high gold prices, so yeah, if we are comparing US dollar trading volumes, then yes, we are in times when the gold market has- has had its highest USD trading notionals. Now, part of this, the reason for this heightened activity is also because we've had interest in gold from a wide range of investors, whether it be central banks, sovereign wealth funds, hedge funds, asset managers, high net worth individuals, retail investors, mm, and even corporate treasuries at times.

Khushil Nathoo: Let's talk about some of those institutional investors. Globally, we've been seeing a growing trend among systematic and macro hedge funds as they increase their exposure to precious metals. And if you look closer in the region, private wealth and family offices in Asia have been doing the same. Now, gold has traditionally moved inversely to real interest rates, so what role is exposure to gold playing for these institutions and particularly in Asia's gold trading landscape?

Ravi Ramakrishnan: Yeah. See, gold is becoming an increasing part of the investment portfolio. Previously, it was macro funds using gold as a hedge or a speculative trading position. But today, nowadays, we are seeing more systematic funds increasing their activity in the gold market. Now this could be through trend following or arbitrage strategies. To your question specifically on Asia, based on what we are observing, the flows are increasing from Chinese investors, hedge funds, and ETF allocators in the region. Looking ahead we see this as a growing trend, especially as gold liquidity deepens in this time zone.

Khushil Nathoo: Ravi, people often think of gold being a physically driven market, but we've been seeing a notable shift towards electronic trading. The number of multi-dealer platforms offering gold trading execution has rapidly grown in recent years and so too have e-traded volumes. In other asset classes, we've often seen electronic trading act as a catalyst for deeper liquidity and a more efficient execution. So with this shift underway, how important has electronic trading been in helping clients express their views?

Ravi Ramakrishnan: People often think of gold trading in its physical form in the form of bars, coins, or even jewelry. But actually gold trades like any other FX pair, and we have noticed that higher volatility has been a catalyst for bringing new users into our electronic platform, J.P. Morgan Markets Execute. We have seen all-time records on the platform this year in terms of volumes. But not just the volumes, even the breadth of the participation amongst clients engaging with us electronically has increased substantially.

Khushil Nathoo: That's really interesting. Thanks for that, Ravi. And as these clients engage electronically, how are their execution preferences evolving? Uh, that is, are you seeing a difference across products, whether it be spots, swaps, or EFPs as clients become more familiar with electronic trading?

Ravi Ramakrishnan: Indeed, we are seeing electronic trading protocols differ across products. For example, for spot, clients tend to prefer streaming prices because speed and immediacy are important. But when it comes to EFPs or swaps, depending on the sizes and the bespoke nature of some of these requests, these could tend to go on an RFQ sort of platform. That will help them execute the exact product that they need.

Khushil Nathoo: And what about API usage?

Ravi Ramakrishnan: Oh, yeah. We have seen an increased usage of API, especially from banks and brokers. I think APIs are less about expressing a market view and more about improving operational efficiencies, automating workflows, and reducing manual touchpoints.

Khushil Nathoo: I see, that is a helpful distinction. And brings us to the question of market flows. So, central bank activity is often an important source of demand supply. In a recent central bank survey by the World Gold Council, respondents held favorable views on gold reserves, with 45% expecting to increase their own reserves over the next 12 months. And if we look at the latest central bank data, we can see some of this unfold. China's current gold-buying run is up to 20 consecutive months with not only the pace, but the size intensifying recently. I spotted May was up to 10 tons alone, the highest monthly additions since December 2024. And this pace still pales in comparison to the consistency of the Czech Republic, which is on a 39-month run of gold purchases, albeit in smaller sizes. Ravi, how should market... Ravi, how should the market read the demand dynamics unfolding in this space?

Ravi Ramakrishnan: We've had consistent central bank demand since 2022 and that has in fact come amidst high and rising prices. With geopolitics still remaining very topical, I think this activity could just continue for the foreseeable future. To me, the key aspect of the central bank demand isn't necessarily just the price, right, but the changes in the geopolitical situation as we continue to move towards a multipolar world. Gold continues to remain one-off, if not the largest non-fiat asset classes in the world. While it's tough to physically store and transfer this relative to fiat currencies, until we have broad-based acceptance of digital assets like Bitcoin in, within the central banking universe, gold will continue to dominate this space.

Khushil Nathoo: And on the other hand, let's not forget about the retail investors, right?

Ravi Ramakrishnan: Oh, yeah, absolutely.

Khushil Nathoo: There were a significant drive of demand in 2025 through gold backed ETFs. Demand was very much comparable with central banks. It was 801 versus 863 tons. This year, we've seen gold ETF launches in the region continue with the likes of Lion Global on the SGX and CSOP launching the city's largest physical gold ETF on HKEX. Are you finding the trend of retail demand holding up in the current climate?

Ravi Ramakrishnan: 2026 so far has been a rollercoaster ride for gold prices, and retail investors have had a large role to play in it. After piling into gold in the first quarter amidst record surge in prices, retail investors have actually pulled cash out of the market. I think this was due to a combination of factors. One, the war in the Middle East obviously drove US dollar rates higher. And the second was that the equity market started to crack, and the retail portfolio started to get hit overall. So while some of the outflows reversed a bit in April and May, we are again, once again, seeing outflows in July. To your point about Asian retail ETFs. Yeah, they've been adding to gold locally while their global counterparts continue to pull cash out of this market. So Asia certainly tends to be where most of the accumulation seems to be happening.

Khushil Nathoo: Shifting gears a bit to the market infrastructure now, we're seeing build out happening across multiple financial centers in Asia. In January, you may recall Hong Kong's FSTB and the Shanghai Gold Exchange signed a cooperation agreement to establish central clearing, additionally looking to scale warehousing by 10 times in the next two years. Similarly, Singapore announced plans in March this year to turn the city into a gold trading hub, looking to strengthen vaulting and establish clearing and settlement systems as well. Do you see these developments shifting liquidity east in the long term away from established centers?

Ravi Ramakrishnan: Firstly, I think these are great initiatives for the Asia-Pacific region from a time zone perspective. And while the two initiatives are different in their own way, the key to their success, I think, is dependent on how they're able to attract liquidity and trading volumes. And this has to be from a wide variety of participants, ranging from central banks and asset managers to the retail investors. As you are aware, gold continues to operate largely in the OTC space, and the LBMA gold prices are the longest-standing benchmarks here. China has become a dominant player in the last two decades in the gold market, especially as a key demand center. And the Shanghai Gold Exchange has evolved from, has evolved to become one of the most important price points to watch out for in the Asia-Pacific region. Premiums and discounts in this Shanghai market has effects on the offshore gold price as it triggers both basis trading and also acts as a barometer for Chinese investment and demand.

Khushil Nathoo: And then in that regard, is there a difference in approach taken by Hong Kong and Singapore towards their central clearing ambitions? And perhaps what does this really tell us about their target audience?

Ravi Ramakrishnan: In Hong Kong, they're starting out with the largest set of clearing members, and these include Chinese headquartered banks and international banks. So Hong Kong will serve to connect China onshore market to the offshore investors in that way. Singapore, on the other hand, is planning to start with the smaller number of clearing banks with very strong local participation, and an intent to add more participants over time, which will allow them to bring more liquidity and participation into this market over a period of time.

Khushil Nathoo: I think that distinction is important, and it aligns with what we're seeing in the futures market. HKEX announced it will relaunch gold futures contracts in the coming months. The previous launch didn't get quite the liquidity it needed to meaningfully develop the market, and perhaps pairing it with Hong Kong's clearing infrastructure now can bring trading activity back to the region. You mentioned digital assets earlier, and we're starting to see the intersection of these two historically separate worlds emerge. That of the traditional physically gold-backed market and the digital assets ecosystem, often built around tokenization and blockchain- based settlement. The World Gold Council recently launched their own digital gold platform, and in this region we're seeing Indonesia run gold tokenization sandboxes, while Thailand and India are already operating digital gold mobile applications at scale. Ravi, what are your thoughts here? Are these innovations meaningfully adding new access routes driven by demand, or do you think they're just repackaging existing demand?

Ravi Ramakrishnan: I think it's doing a bit of both, but it's increasingly opening up genuinely new pools of demand rather than just repackaging what already exists. Digitization of gold trading is picking up in multiple markets and offering gold trading and settlement through blockchain infrastructure, enables improved settlement times and extended trading hours. Potentially we are moving towards a 24/7 gold trading market, though these are still very early days. Mobile trading apps like those in Thailand and India have significantly increased retail accessibility, similar towards zero-fee brokerages did for equities. This is especially true among the younger population who do not want to be bothered with dealing with the physical aspects of gold. These platforms differ in their product offerings, but most pitch gold trading backed by physical gold holdings, either locally or in liquid offshore locations like London or Zurich.

Khushil Nathoo: That's actually a good segue for us to talk about stablecoins here. The stable coin market looks to have grown to over 300 billion, surging nearly 100 billion in the past 12 months. Nearly the entire market is dollar-pegged with the likes of USDT by Tether being the most populous stablecoin, holding around 63% market share. While the reserves backing USDT are largely treasurables, gold represents about 10%. How is the growth of these gold-backed coins, such as USDT or even PAX Gold, impacting liquidity? Given that once the issuers purchase gold for reserve purposes, they effectively reduce the outstanding free float.

Ravi Ramakrishnan: Yes, certainly. I think stable coins are acting as a new source of gold demand, which did not exist more than a few years ago. Tether's gold holdings of what, over 130 tons? Those are probably larger in size than most of the smaller central banks' gold reserves. I think the market is still digesting the implications of this, especially because it removes liquidity from circulation. If gold-backed stablecoin issuance continues to grow at the same pace that we have seen in the last few years, it certainly has the potential to lock away gold that would have otherwise been available for trading in liquid locations.

Khushil Nathoo: Fascinating, Ravi. If the market needed any more proof that gold is still keeping everyone on their toes, I think today's conversation provided it. What comes across clearly is just how much the gold market in Asia is evolving, whether that is in who's participating, where they're trading, or how they're accessing it. Thank you for taking the time to walk us through it all.

Ravi Ramakrishnan: We surely are in interesting times, and there is a lot of exciting developments in the future to watch out for. Thanks a lot, Khushil, for having me.

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