By Biman Mukherji in Hong Kong and Ese Erhereine in London 

Asians buy most of the world's gold, but nearly all of it trades in London. Now, with Western investors souring on the metal, the region is making a bid for some of the action.

Three big financial hubs in Asia are separately launching trading in a gold contract, each backed with physical gold.

If they draw enough investors, the contracts could influence the price of gold, which is set by a daily fix in London.

"You now have a market that's driven by Asia," says Catherine Raw, who manages BlackRock Inc.'s $7 billion global mining fund.

The Shanghai Gold Exchange was launched in September inside the city's free-trade zone, offering yuan-denominated contracts backed by gold held in Shanghai. This week, Singapore will offer its own contract, and later this year, CME Group Inc., which operates exchanges in Chicago and New York, plans to start a U.S. dollar-denominated contract in Hong Kong.

In the U.S. and Europe, gold is often bought as a hedge against higher consumer prices. But with few signs of inflation, the price of gold has fallen 10% since March and is down by a third since the end of 2012.

Holdings by gold-backed exchange-traded funds fell to 53.5 million ounces in October, the lowest level in five years, according to U.S-based ETF Securities.

In Asia, where the metal remains popular as a store of wealth, demand for gold jewelry, bars and coins is robust. The World Gold Council, an industry body, says demand in China rose to almost 1,300 tons in 2013, up 160% from five years ago, although it expects demand to be flat, at best, this year. In India, buying was 50% higher over the same period at 975 tons.

China is now the world's largest producer and consumer of gold, and the biggest importer, as domestic demand has outstripped supply. India also is a major buyer and importer. Two-thirds of global gold purchases come from Asia, the World Gold Council says.

Still, many observers say Asia is likely to find it a hard task to unseat London as the world's center for gold trading. A major reason: China bans the export of gold bullion, arguing its huge domestic production is needed to meet local demand.

That means gold can flow into China when prices there are above those set in London, but cannot move the other way. Beijing's strict controls also limit movement of capital.

"Any desire by China to establish a price benchmark which is not London-based is impaired by these restrictions," says Ryan Case, Brisbane, Australiabased head of institutional sales for bullioncapital.com, a gold exchange.

London has dominated the trade in physical bullion for more than 300 years. Vaults in the city, including one under the Bank of England, house 7,500 tons of gold, according to the London Bullion Market Association. Since 1919, prices have been set in the city by a twice-daily conference call among four banks: Barclays PLC, HSBC Holdings PLC, Bank of Nova Scotia and Société Générale SA.

Trade in gold futures--agreements to buy or sell the metal at a specified price on a predetermined date--is dominated by the Comex division of the New York Mercantile Exchange. The contracts in Shanghai and Singapore are backed by physical trade in gold, while Hong Kong's plans are for a futures contract.

Efforts in the past by Asia to set local gold prices haven't been successful. In 2010, the Singapore Exchange offered a gold contract but later withdrew it amid poor investor appetite.

"The greater prominence of prices out of Asia can only enhance the mix, but I doubt within the next couple of years that it will fundamentally change the way spot prices are derived," says Ross Norman, chief executive officer at Sharps Pixley, a London-based bullion broker.

Still, London's role in setting gold prices is coming under scrutiny.

In May, a U.K. regulator fined Barclays $44 million after one of its traders manipulated the gold price at the expense of a client. The London Bullion Association is looking to replace the gold fix with an electronic system, following a similar change made in August to how silver prices are determined.

"Recent 'scandals' in the London price-fixing mechanisms would seem to give China an opportunity to step in and prove that they can run a 'clean' pricing mechanism," said Chris Gaffney, a market strategist at EverBank Wealth Management, in an email.

The new contracts could also further boost Asian demand, allowing traders and investors to hedge positions in local currencies, analysts say.

"We need a market mechanism in this time zone," says Albert Cheng, managing director for Asia at the World Gold Council.

Investors may also want to take advantage of arbitrage opportunities, some analysts say. Asian gold prices are often higher than in the West, reflecting higher demand in the region.

"More open markets in Asia should facilitate arbitrage and tighten international spreads," says Mike McGlone, director of research at ETF Securities.

Mr. Norman at Sharps Pixley believes Asia is likely to find a niche in a fragmented market.

"New York remains central to the futures market and London to physical flows, vaulting and many of the rules and standards," he says. "My guess is that the Asian markets will develop their own niche...It will not be a case of winner takes all."

Write to Biman Mukherji at biman.mukherji@wsj.com and Ese Erhereine at ese.erhereine@wsj.com

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