SMC Alert: Gold and Banking in Hong Kong
S U RV I V E A N D T H R I V E I N T H E A G E O F T U R M O I L
SMC Alert: Gold and Banking in Hong Kong We’ve reported several times before that Hong Kong is one of the cheapest places in the world to buy gold. But the bottom line is that it’s getting a bit more difficult to do so. At Hang Seng Bank, for example, they will now only sell a maximum of HK$120,000 (about US$15,400) worth of gold coins to non-account holders. This is less than 12 ounces of gold. Now, if you open an account at Hang Seng Bank, no limit applies. And, the good news is that anyone can still open a bank account with them. Hang Seng does not require Hong Kong residency or a Hong Kong Identity card to open a bank account. But, you will need to show up in person to the bank with the following: 1. Passport 2. Proof of current residential address I would also bring a driver’s license or other identity document that has your address on it, if possible. The proof of current residential address can take the form of a utility bill – an electricity, gas, or water bill is best. But, a bank statement may also be accepted. The utility bill or bank statement cannot be more than 3 months old. And the name on it must exactly match the name in your passport. In terms of inventory, Hang Seng only has current-year Australian Kangaroo Nuggets from the Perth Mint. All sizes are available: 1 Oz, ½ Oz, ¼ Oz and 1/10th Oz. www.sovereignman.com
S U RV I V E A N D T H R I V E I N T H E AG E O F T U R M O I L
According to the bank, it’s possible for customers to buy up to 100 coins without any problem. But stocks are limited, so several hundred coins at one time would be problematic. Their prices are still good – about 4% above spot gold. When spot gold was at US$1,320.40 an ounce, Hang Seng quoted the following: 1 Oz -- HK$10,635 = US$ 1,372 (about 4% above spot gold prices). ½ Oz -- HK$5,435 = US$701 ¼ Oz -- HK$2,795 = US$361 1/10th Oz -- HK$1,170 = US$151 Moreover, the difference between the buy price and the sell price (called the “spread”) is just HK$50, or about USD $6.45. In other words, you can buy gold coins in Hong Kong, then turn around and sell them for just $6.45 per ounce less than what you paid. Obviously since the gold price is fluctuating all day long, a $6.45 change in price is nothing… and this is one of the reasons why we consistently say that Hong Kong is one of the cheapest places in the world for precious metals. Small quantities of secondhand coins that other customers have sold back to the bank are also still available from time to time. And the spread is the same – just HK$50.
2
www.sovereignman.com
SMC ALERT 22nd October 2013
S U RV I V E A N D T H R I V E I N T H E AG E O F T U R M O I L
But all of that is just for Hang Seng. Other banks have different policies. Bank of China, for example, is very restrictive. It is no longer possible to buy or sell ANY gold bullion product at the Bank of China unless you have a bank account there. What’s more, you cannot open a bank account with them unless you are a Hong Kong resident. Their stocks of gold coins for sale are also more limited than they have been before. They have only Canadian Maple leafs in stock. And rather curiously, Bank of China does not have any Chinese Panda coins in stock. This is rather strange because Bank of China is a mainland bank where Chinese Panda coins are among the most popular. For reference, the quote on a 1 Oz Maple Leaf at the Bank of China when spot gold was at US$1,313.30 was HK$10,639 (about US$1,372.80), or 4.5% above the spot price of gold. But again, the spread at Bank of China is just HK$50. So, you can sell coins back to them for just HK$50 below the buy price. But, they are fussy about the condition of the coins. They prefer coins to still be in the plastic seal they come in from the Canadian or Chinese mints. And, in the case of Panda coins, they will only purchase coins minted in the current year. While gold prices may be significantly lower than a year or two ago, supply here in Asia is tight. Buyers have been scooping up all the physical gold they can get their hands on. There are also strong suggestions in Asian financial circles that China is trying to accumulate as much gold as possible, with a view to eventually making the Yuan at least partially convertible into gold. There are similar rumors with respect to the Hong Kong dollar.
3
www.sovereignman.com
SMC ALERT 22nd October 2013
S U RV I V E A N D T H R I V E I N T H E AG E O F T U R M O I L
We can’t verify these claims. But the (government controlled) Bank of China’s much more restrictive policies on buying and selling gold bullion here in Hong Kong are certainly consistent with these theses. This continues to make the Hong Kong dollar one of the more attractive (or least ugly) paper currencies to hold, especially if you are based in US dollars. Hong Kong’s dollar is pegged to the US dollar at 7.80 +/- a very narrow band. So if you’re accustomed to holding US dollars, holding Hong Kong dollars carries very little downside currency risk. For years, the Hong Kong dollar has been desperately clinging to the upper portion of that band, and Hong Kong’s monetary authority has had to buy copious amounts of US dollars in order to restrain the exchange rate. This is clearly unsustainable, and the calls to abandon this peg are growing louder by the day. It’s getting to the point where the government is having to publicly deny it. Once a politician steps up to the microphone and denies that something is going to happen, you can almost bet that it’s already in the works. I suspect that we’ll see a similar move that the Chinese pulled several years ago. The Hong Kong Monetary Authority will announce that they’re switching the peg to a free-floating basket of currencies, including the euro and renminbi. This basket will initially be set at the same exchange rate (7.80). But then it will float freely in the market. Over time, they will gradually revalue the basket, increasing the Hong Kong dollar’s ties to the renminbi. This has huge implications in global finance; if the Hong Kong dollar is tied to the renminbi, then this effectively creates a freely convertible renminbi worldwide, the key ingredient to becoming a global reserve currency.
4
www.sovereignman.com
SMC ALERT 22nd October 2013
S U RV I V E A N D T H R I V E I N T H E AG E O F T U R M O I L
Given the US dollar’s wanton debasement, it seems clear that Chinese authorities are accelerating their plans to make this happen. All of this continues to make Hong Kong a really great place to bank (along with Singapore as well). For the next decade or more, both of these countries will become the most important global financial centers. So—to review: 1. Gold is still cheap in Hong Kong at just a HK$50 spread (USD $6.45). But inventories and buying conditions are restricted. 2. It’s still possible for nonresident foreigners to open an account at Hang Seng Bank. 3. It’s still a good idea to consider holding Hong Kong dollars .
5
www.sovereignman.com
SMC ALERT 22nd October 2013
SMC Alert: Gold and Banking in Hong Kong We’ve reported several times before that Hong Kong is one of the cheapest places in the world to buy gold. But the bottom line is that it’s getting a bit more difficult to do so. At Hang Seng Bank, for example, they will now only sell a maximum of HK$120,000 (about US$15,400) worth of gold coins to non-account holders. This is less than 12 ounces of gold. Now, if you open an account at Hang Seng Bank, no limit applies. And, the good news is that anyone can still open a bank account with them. Hang Seng does not require Hong Kong residency or a Hong Kong Identity card to open a bank account. But, you will need to show up in person to the bank with the following: 1. Passport 2. Proof of current residential address I would also bring a driver’s license or other identity document that has your address on it, if possible. The proof of current residential address can take the form of a utility bill – an electricity, gas, or water bill is best. But, a bank statement may also be accepted. The utility bill or bank statement cannot be more than 3 months old. And the name on it must exactly match the name in your passport. In terms of inventory, Hang Seng only has current-year Australian Kangaroo Nuggets from the Perth Mint. All sizes are available: 1 Oz, ½ Oz, ¼ Oz and 1/10th Oz. www.sovereignman.com
S U RV I V E A N D T H R I V E I N T H E AG E O F T U R M O I L
According to the bank, it’s possible for customers to buy up to 100 coins without any problem. But stocks are limited, so several hundred coins at one time would be problematic. Their prices are still good – about 4% above spot gold. When spot gold was at US$1,320.40 an ounce, Hang Seng quoted the following: 1 Oz -- HK$10,635 = US$ 1,372 (about 4% above spot gold prices). ½ Oz -- HK$5,435 = US$701 ¼ Oz -- HK$2,795 = US$361 1/10th Oz -- HK$1,170 = US$151 Moreover, the difference between the buy price and the sell price (called the “spread”) is just HK$50, or about USD $6.45. In other words, you can buy gold coins in Hong Kong, then turn around and sell them for just $6.45 per ounce less than what you paid. Obviously since the gold price is fluctuating all day long, a $6.45 change in price is nothing… and this is one of the reasons why we consistently say that Hong Kong is one of the cheapest places in the world for precious metals. Small quantities of secondhand coins that other customers have sold back to the bank are also still available from time to time. And the spread is the same – just HK$50.
2
www.sovereignman.com
SMC ALERT 22nd October 2013
S U RV I V E A N D T H R I V E I N T H E AG E O F T U R M O I L
But all of that is just for Hang Seng. Other banks have different policies. Bank of China, for example, is very restrictive. It is no longer possible to buy or sell ANY gold bullion product at the Bank of China unless you have a bank account there. What’s more, you cannot open a bank account with them unless you are a Hong Kong resident. Their stocks of gold coins for sale are also more limited than they have been before. They have only Canadian Maple leafs in stock. And rather curiously, Bank of China does not have any Chinese Panda coins in stock. This is rather strange because Bank of China is a mainland bank where Chinese Panda coins are among the most popular. For reference, the quote on a 1 Oz Maple Leaf at the Bank of China when spot gold was at US$1,313.30 was HK$10,639 (about US$1,372.80), or 4.5% above the spot price of gold. But again, the spread at Bank of China is just HK$50. So, you can sell coins back to them for just HK$50 below the buy price. But, they are fussy about the condition of the coins. They prefer coins to still be in the plastic seal they come in from the Canadian or Chinese mints. And, in the case of Panda coins, they will only purchase coins minted in the current year. While gold prices may be significantly lower than a year or two ago, supply here in Asia is tight. Buyers have been scooping up all the physical gold they can get their hands on. There are also strong suggestions in Asian financial circles that China is trying to accumulate as much gold as possible, with a view to eventually making the Yuan at least partially convertible into gold. There are similar rumors with respect to the Hong Kong dollar.
3
www.sovereignman.com
SMC ALERT 22nd October 2013
S U RV I V E A N D T H R I V E I N T H E AG E O F T U R M O I L
We can’t verify these claims. But the (government controlled) Bank of China’s much more restrictive policies on buying and selling gold bullion here in Hong Kong are certainly consistent with these theses. This continues to make the Hong Kong dollar one of the more attractive (or least ugly) paper currencies to hold, especially if you are based in US dollars. Hong Kong’s dollar is pegged to the US dollar at 7.80 +/- a very narrow band. So if you’re accustomed to holding US dollars, holding Hong Kong dollars carries very little downside currency risk. For years, the Hong Kong dollar has been desperately clinging to the upper portion of that band, and Hong Kong’s monetary authority has had to buy copious amounts of US dollars in order to restrain the exchange rate. This is clearly unsustainable, and the calls to abandon this peg are growing louder by the day. It’s getting to the point where the government is having to publicly deny it. Once a politician steps up to the microphone and denies that something is going to happen, you can almost bet that it’s already in the works. I suspect that we’ll see a similar move that the Chinese pulled several years ago. The Hong Kong Monetary Authority will announce that they’re switching the peg to a free-floating basket of currencies, including the euro and renminbi. This basket will initially be set at the same exchange rate (7.80). But then it will float freely in the market. Over time, they will gradually revalue the basket, increasing the Hong Kong dollar’s ties to the renminbi. This has huge implications in global finance; if the Hong Kong dollar is tied to the renminbi, then this effectively creates a freely convertible renminbi worldwide, the key ingredient to becoming a global reserve currency.
4
www.sovereignman.com
SMC ALERT 22nd October 2013
S U RV I V E A N D T H R I V E I N T H E AG E O F T U R M O I L
Given the US dollar’s wanton debasement, it seems clear that Chinese authorities are accelerating their plans to make this happen. All of this continues to make Hong Kong a really great place to bank (along with Singapore as well). For the next decade or more, both of these countries will become the most important global financial centers. So—to review: 1. Gold is still cheap in Hong Kong at just a HK$50 spread (USD $6.45). But inventories and buying conditions are restricted. 2. It’s still possible for nonresident foreigners to open an account at Hang Seng Bank. 3. It’s still a good idea to consider holding Hong Kong dollars .
5
www.sovereignman.com
SMC ALERT 22nd October 2013
