Sovereign Man Notes from the Field Date: May 19, 2011 Reporting From: Hong Kong

In Business on May 19, 2011 at 4:43 pm

Sovereign Man
Notes from the Field

Date: May 19, 2011
Reporting From: Hong Kong

[Editor’s note: Tim Staermose is filling in for Simon Black today who is out looking at property for the next few days.]

Two days ago I hit the banks along Des Voeux Road in Central Hong Kong to check out what gold bullion coins are available, and what the banks are charging.

Oddly enough, last time I reported on this, we got a lot of “blowback” from our readership, saying the “cheap” prices I quoted had to be incorrect.

Some people even accused me of making it up.

Well, let me again go on the record as saying that Hong Kong is “hands down the cheapest place in the world to buy gold coins.”

Well, on Tuesday afternoon at 3:39pm, when spot gold was trading at the equivalent of HK$11,597 an ounce (US$1,490), Hang Seng Bank was selling a 1-ounce Krugerrand coin for HK$11,605.

That’s a minuscule 0.15% above the spot price. If any of you know somewhere else in the world I can buy gold bullion coins for less, please LET ME KNOW! Needless to say, I put my money where my mouth is and bought an ounce.

At the same time, Hang Seng Bank was quoting HK$12,130 (US$1,558.48) for 1-ounce Australian Kangaroo Nugget coins.

That’s a premium of 4.6% above the spot price of gold prevailing at the time. (I was on the phone to my friend who gave me the then prevailing spot gold price from

Nothing else was in stock at Hang Seng Bank. I asked about SILVER bullion coins, too. They didn’t have any. The teller, whom I recognized from my many previous visits, said that in her 17 years of working at the bank, they’ve actually never stocked silver coins.

Over at the Bank of China, just a few doors down from Hang Seng, they had the full complement of Canadian Maple Leaf gold bullion coins in stock… 1 Oz, 1/2 Oz, 1/4 Oz, 1/10th Oz, and 1/20th Oz were all available.

Prices were HK$12,127 for the 1-ounce size, HK$6,152 for the 1/2-ounce size, HK$3,158 for the 1/4 ounce coin, HK$1,325 for the 1/10th of an ounce coin, and HK$762 for the smallest of the lot — the 1/20th of an ounce size coin.

In US$ terms, that translates into US$1,558.10 for the 1-ounce Maple Leaf. That was a 4.57% premium to the spot price.

Interestingly, the Bank of China’s own preferred coin, the Chinese Panda, was only available in the 1/2 Oz size.

They wanted HK$6,114 (US$785.54, or US$1,571.08 for an ounce).

That was 5.4% above spot gold for those, which if you do some checking around, is actually a VERY GOOD price.

The Maple Leaf half ounce coin at the same time, as per the prices I’ve quoted above, was selling at HK$6,152 (US$790.42, or US$1,580.84 for an ounce).

So, the premium on the half-ounce Maple Leaf was 6.1%, versus just 5.4% for the Panda.

This is the REVERESE of what you’ll find in North America, where the Chinese Panda coins always tend to trade at the largest premiums to spot.

A quick check online (admittedly not the same as going to a bunch of dealers in person) shows premiums for the half-ounce Panda, for example, of as much as 9%. See, for instance:

I’ve said before that, for the right person, traveling to Hong Kong solely for the purpose of buying gold coins can make a lot of sense. The money you save on buying your stash of coins, will save you a bunch of money… perhaps enough to pay for your entire trip.

So, you’ll have had a holiday in one of the world’s most interesting and dynamic cities essentially for free.

On a 50-ounce purchase, at $1,500 an ounce, every 1 percentage point you can save in premium is equivalent to $750.

Typical premiums on Krugerrands in Europe and North America that I’ve seen range from 3% to 6%. (Again, please let me know if you have a source that is considerable cheaper).

Compare that to the 0.15% premium I paid in Hong Kong and on a 50-coin purchase, you’ll save over $2,100, which would be well worth the effort for some people.

Looked at another way, you get MORE GOLD FOR YOUR MONEY in Hong Kong than anywhere else I know.

[Editor’s Note: Tim’s new investment alert service, The 4th Pillar, is now open to the public on a limited basis. New membership is restricted, and Sovereign Man: Confidential members had a 48-hours advance. Only 13 memberships remain, after which it will be taken off the market. Click here to read more about this unique service. ]

Until tomorrow,

Tim Staermose

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