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Thread: Gold: Hong Kong - cheapest place to buy gold coins!

  1. #1
    Join Date
    Oct 2008

    Gold: Hong Kong - cheapest place to buy gold coins!



    October 4, 2011

    Hong Kong

    Still a bit bleary eyed from last night’s 12-hour flight from Johannesburg, I decided to walk off the jet lag this afternoon by taking a stroll down Queen’s Road in Hong Kong’s Central district.

    If you’ve never been, the streets are lined with banks (and shopping malls), meaning there’s no shortage of places to buy gold. It’s commonplace in Hong Kong for banks to sell gold (same in Singapore, Austria, and many other countries), but what I continually notice here is that premiums over spot are among the lowest in the world.

    Now, bear in mind that I just came from South Africa… perhaps the ‘goldest’ of the gold producing nations. I was hard pressed to find too many credible retail outlets in Johannesburg and Cape Town with Krugerrands selling gold for less than an 8% to 10% premium over spot.
    Today in Hong Kong at the Bank of China main branch on Queen’s Road, I bought an ‘unsealed’ Maple Leaf (i.e. loose coin) for just 0.5% over spot; I also purchased a ‘sealed’ Maple Leaf (i.e. collector-ready) for an additional $60, or about 4.5% over spot.

    The 'sealed' Maple Leaf I purchased at 4.5% over spot; the unsealed go for 0.5%.

    This is an image of the gold prices that Bank of China was buying and selling at this afternoon. The gold price at the time was about 12,980 HKD.

    Funny thing, it wasn’t even the best price in town. You can buy gold for as low as 0.2% over spot (practically a rounding error) in Hong Kong. Unfortunately, just about every bank was out of stock.

    This is a special holiday week they call ‘Golden Week’; it’s one of those manufactured holidays that the government uses to encourage domestic consumption. Given the name, a lot of people traditionally scoop up gold bullion… they apparently think it’s lucky to buy gold during Golden Week. Go figure.

    Needless to say, the banks start running out of stock and the premiums go up; if I had timed my visit a bit better, I could have gotten a better deal. Such is life.

    Now, let’s be clear about something– I didn’t buy this gold as a speculation. I’m not constantly refreshing my screen so that I can run back down to the bank and make a quick profit. You don’t buy something that’s appreciated 10-years in a row and has increased 7-fold in the same period as a speculation.

    If you want to speculate, buy ridiculously cheap assets that people hate. Buy things so that people will think you’re crazy for wasting your time… they’ll even get angry. Then let it sit for 5 to 10 years.

    Gold isn’t really in that category anymore. Your friends and family probably won’t hold a group intervention session to stop you from buying a few ounces. Gold is not hated… by -most- people.

    You know, on my flight to Hong Kong last night, I read an article in the FT entitled “Gold bugs beware– the bubble is finally bursting.” As you could imagine, the article goes on to say that gold’s $300 drop in the last month portends the end of a decade-long bull market in gold.
    What a completely naive position. Amazingly enough, the author is a university professor who is responsible for shaping the minds of future business leaders. This fact alone is evidence that gold is not in a bubble.

    Look, it’s extremely unlikely, almost impossible that gold could continue to go up year after year after year, as it has over the past decade. Nothing goes up (or down) in a straight line. But gold’s long-term strength is in its value as a currency alternative, not a speculation.

    Gold remains one of the only true anti-currencies out there. The concept of a ‘print-at-will’ fiat currency is garbage… and in a way, the world owes a debt of gratitude to Ben Bernanke and the Eurozone for making this point abundantly clear to anyone who is paying attention.

    As more people wake up to the unfolding disaster and watch their worthless paper currencies be reduced to British Thermal Units, the long-term prospects of gold make sense; for the foreseeable future, there are simply no liquid, internationally recognized, traditional, politically benign alternatives to paper.

    So if you’re out there in the world, consider stopping by Hong Kong to pick up as much gold as you can; the premium savings alone may offset the cost of your trip. And, if you’re a creative, enterprising individual, consider coming to Hong Kong to buy gold for others (at a profit, of course). Start a trend– become the world’s first ‘gold mule’.

  2. #2
    Join Date
    Oct 2008


    October 5, 2011
    Hong Kong

    It’s the Chung Yeung Festival holiday in Hong Kong today… it’s nothing but an excuse to go shopping (and sing Elvis tunes in public). Think Black Friday (day after Thanksgiving) in the US or Boxing Day in the UK on steroids.

    One of the big differences is that, aside from buying plasma screen televisions and faux Louis Vuitton handbags, the Chinese are buying all the gold they can get their hands on. When was the last time you heard of somebody getting trampled in Wal Mart because of a special on quarter-ounce Eagles?

    The Chinese, both in the mainland and in Hong Kong, have a cultural proclivity towards gold. Similar to India and the Arab world, they don’t view it as a barbarous relic, but rather a more reasonable store of value than paper currency. Gold ownership is very common here, even if just in denominations as small as 2.5 grams.

    As I mentioned yesterday, Hong Kong is one of the cheapest places in the world to buy gold. (it’s also one of the best places to bank, but we’ll save that for another time…) But what about storage?

    Bank safe deposit boxes are the common solution; when people think ‘valuables storage,’ they think bank safe deposit boxes. Ironically, this is exactly how banking first began– bankers were the safekeepers of people’s valuables. In exchange for securing people’s gold, customers would pay the bankers a fee. This is how safe deposit boxes work today.
    While banks in Hong Kong are far more stable and reliable than insolvent government puppet banks in the west, I’ve always preferred private storage facilities. They’re typically unregulated and don’t fall under a host of various government inspection agencies.

    Once place in Hong Kong that I’ve had a good experience with is a company called The Storage ( in the Sheung Wan district. Established in 2004, the Storage rents safe deposit boxes as well as private mailboxes.

    The smallest safe deposit boxes (large enough to store several million dollars worth of gold coins) cost just under $80/year, and you can pre-pay 2-years in advance. They do not rent boxes anonymously, but you can rent through a corporation.

    Boxes are in a highly secure, bank-style vault with round-the-clock in-house security; box contents are automatically insured to HKD 100,000 (about $13,000 USD).
    As of this week, they still have small boxes available (always the most popular), though only on the top shelf of their secure room.

    So why am I telling you this? Because it makes a hell of a lot of sense to store precious metals overseas:
    1) Like it or not, confiscation is a risk. The higher the gold price becomes, the more it ends up on the radar for creditors, bureaucrats, or anyone who’s just plain litigious. Banks and storage facilities in your home country fall within the same jurisdiction as you do, so if you get dragged into court or onto some bureaucrat’s list, the risk of asset seizure is very high.
    2) For US taxpayers, gold stored overseas in your own vault is currently not a reportable asset, so it’s an effective, legitimate means of storing wealth privately. I’ll get into the new FACTA reporting requirements another time.

    3) If you move gold overseas to a stronger economy with a gold-oriented culture, it will be much easier for you to sell and exchange for something of value. Think about it– in the US, what would you get if you sold your gold? US dollars. And only in certain designated places. In Hong Kong, I could trade for any number of currencies, goods, services, etc.

    4) Transporting gold out of the country is getting harder and more onerous. If you can possibly envision yourself ever leaving your home country if/when things get rough, you’re going to want it prepositioned overseas already in a place where you can actually use it, not stuck at home buried in the backyard, or at a bank that’s been taken over by the government.

    None of this is to suggest that the world is coming to an end… but we shouldn’t kid ourselves that we still live in the good old days. Internationalization is a smart strategy to reduce your sovereign risks and help you prepare for whatever lies ahead.

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