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A Follow Up To The Physical Gold Arbitrage Trade
A few days ago, in "Hands down, the cheapest place in the world to buy gold coins" we presented Simon Black's thoughts on an interesting physical gold arbitrage (buy cheap physical in Hong Kong, sell it where it is expensive) which created quite a stir. Today, the "Sovereign Man" provides some additional information, and answers some of the most frequent questions he received in response to his article, with a particular focus on the question of whether taking gold out of Hong Kong or bringing it into the US is considered smuggling. The answers may surprise you...
Google is the Black Hole of Accurate Information
From Simon Black of Sovereign Man
I had a rather interesting meeting last night with a notable Chilean attorney who is the chief legal counsel of one of the country’s largest telecom firms. We talked about the growth of the local economy and the lengths to which the government here is trying to attract foreign investors and entrepreneurs.
We’ve discussed before in our daily conversations what I see as a new trend: governments competing for residents. Some countries– Chile, Latvia, Singapore, Panama, Estonia, etc. understand that their economic future depends on attracting the brightest minds possible.
(note: we covered unique residency options in two of these countries in our most recent edition of Sovereign Man: Confidential)
Other countries go out of their way to repel or even prevent talented foreigners from settling, as if the fundamental freedom to work hard and prosper is somehow derived from irrelevant, invisible lines on a map.
I’ll have much more to say about this next week; for now, I want to move on to our weekly q&a.
Earlier this week, I wrote to you about banks in Hong Kong such as Hang Seng bank which sell Canadian Maple Leaf coins for just 0.5% above spot price, and Chinese Panda coins as 4.9% above spot price.
This article triggered a host of questions that I’d like to address today:
1. “I googled gold prices in Hong Kong and noticed different prices than what you mentioned in your article. Why the discrepancy?”
Google is the black hole of accurate information. The intelligence on the ground always trumps the ether of the Internet, and my partner Tim was actually standing at the bank in Hong Kong speaking to the cashiers.
It’s common to see significant inaccuracies online, especially considering the banks don’t sell their gold over the Internet or the phone… only to walk-in customers. So naturally the most accurate pricing will be at the branch.
2. “Once I buy gold coins in Hong Kong, is there any restriction to taking them out of the country?”
No, there are no restrictions for transporting gold out of Hong Kong as precious metals are not a controlled or prohibited item listed by Hong Kong Customs (rough, uncut diamonds are).
We have transported gold out of Hong Kong numerous times in our carry-on luggage without so much as a glance from security.
3. “Are there restrictions on bringing in gold coins when I return home?”
It depends on where you are flying to and what you purchase. If you are flying to North America, neither the Canadian nor US government considers gold to be a monetary instrument.
Maple Leaf and Eagle coins are technically deemed legal tender in each country, so you would have to raise your hand if the aggregate face value of the coins plus whatever other cash you have on hand exceeds $10,000.
Bear in mind, customs officials in North America have unlimited authority to do whatever they want, even if you are well within the law. As such, it may be advisable to have a receipt for the coin purchase in Hong Kong, as well as evidence for your source of funds (bank statement is sufficient).
If you’re ever in doubt about the regulation, ASK.
4. “Are there any countries that I should avoid for transporting bullion?”
Yes, absolutely. To name a few: Mexico. Thailand. Most of Africa. Russia. Uruguay.
I would also generally avoid Panama as well– the country’s customs regulations value gold based on its market value, not face value… and anyone who brings more than a trivial amount of gold into the country could end up paying an unnecessary import duty.
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Spitzer,
I thought you were a physical only, fofoa guy. You hold mining shares also?
Yeah, I dont agree with FOFOA on the mining shares.
But I prefer debt free unhedged mining shares.
Mining shares are not the paper gold that the LBMA,COMEX and ETF market is.
Vietnam isn't that bad. A friend of mine has been going there once a year for the last few years. Came back with a bride this time. Not bad. He was Vietnamese himself, but his family fled the country for the US after the end of the war. He has suggested to me several times that I should go with him some time. I just might. Especially if I can make a stop in HK first.
Vietnam comes to mind but one had best be quite a seasoned border-crosser indeed.
I wonder how the this carry trade would fare in other SEA countries. I would guess one's Maple Leafs might just disappear forever at the airport.
how would customs know you have gold with you?
i went to panama en route to points south and they didn't ask any questions...when in S. America, having a few krugerrands just in case is IMO good policy.
TSA is your bigger risk
well yeah, but you are still committing a crime. I would do it, I don't give a fuck.
you sound like a lil girl who got bitch slapped on the play ground... did big bad trav on the internet make you cry? does your pussy hurt? do you need some midol.. shut the fuck up.
do you pull on his ears when you fuck that dog?
I'm trying to think of something that goes with "bitchez", but my brain is tired.
And we are talking what happens to an actual female dog. Yeah, cheesy brain tired, too
Yeah,
Try the machine, X Rays, or DO you have anything to declare?.
I know of 2 cases where legit business men, were exiting the US,with cash to buy plants for their tree farms.
Did it every year, for years.(Their suppliers demanded USD's).
One occasion the man had $13k, they ask him why he had it, and he explained ,and he done so for years.(even provided Legal Docs for the purpose).
He was taken into a room, grilled for hours, and his $$$ taken.
Three yrs later he won his case, got his $13k back, but not he 25k it cost in legal fees.
Like SEVERAL have said here, ASSUME nothing.
WHENEVER I'm away from mission control, I carry a few 1oz gold and 1oz silver coins, in case the electronic banking system collapses.
The silver coin will sort out the cab ride to the airport, and the gold coins a seat on the first flight out.
I have my doubts that the average person even knows what the value is of a silver/gold coin even is over face value??? I'm thinking 98% of them would say no way Jose.
That's why you also carry 10k in bills just in case you have a retard willing to take it instead of gold or silver while the world burns down around him.
My thoughts exactly. I started carrying a roll of silver quarters, though. No-one ever questions those, even if they see them.
OT: 'We're done with the Canadian peso': Flaherty
http://www.financialpost.com/news/economy/Were+done+with+Canadian+peso+F...
Unless you have enough wealth for a long court fight you may find your gold coins charged with being criminal. No I'm not drunk. This is the basis of forfeiture - that the coins or car or house or airplane can be regarded as criminal. Don't believe me go look it up. They can be regarded as guilty and not innocent without proof because they don't have the same rights you do. Truely the law is an ass.
Inanimate objects cannot be guilty of anything . . . even in this tripped out post-reality Amerika.
All they have to do is declare that silver and gold are "essential to national security".
Lord Koos,
Funny you said that, as its already been brought up by UNCA.
Slvr IS now considered a Strategic Metal,you know what that means.
Just for grins, IMAGINE Slvr DID short squeeze?.
The number of uses for it are inumerable.
How long do you think it would take Sammy to STEP on that dime?.
My $$$ says yesterday.
Bagbalm is right. From http://en.wikipedia.org/wiki/Civil_forfeiture:
"There are two types of forfeiture cases, criminal and civil. Almost all forfeiture cases practiced today are civil. In civil forfeiture cases, the US Government sues the item of property, not the person; the owner is effectively a third party claimant. Once the government establishes probable cause that the property is subject to forfeiture, the owner must prove on a "preponderance of the evidence" that it is not. The owner need not be judged guilty of any crime."
They steal people's houses and cars over a little weed. There is even highway robbery these days: "A form of asset forfeiture is roadside forfeiture during a vehicle stop. Usually enforcing State policies by Highway police, local law enforcement have built up seized funds and spent them with oversight only from local judges who sometimes benefit from the expenditures of such expenditures. The presumption is that travelers hiding large amounts of cash are transporting drug money. Often, the vehicle occupants are required to simply sign a waiver that they will leave the State and not return, thus also not attempt to retrieve their funds."
Welcome to The Onion Kafka tripped-out post-reality Amerika.
Really, get caught with a bunch of cash in the U.S. without rock solid (bank statements, pay stubs) showing origin and you will never see that guilty cash again..
Not sure how this is going to make you money. Even with a "friendly" dealer they are going to charge you +03% over spot to sell to you, and -03% under spot to buy from you. That is how they pay their rent, utilities, employee salaries, insurance, etc.
So even if you paid exactly spot for your coins, if you flew them from Hong Kong back to the US (for example) and went to sell them, that would be a 03% loss. So how exactly would this arbitrage work? I don't see that it does.
Well SunSword you could sell them at retail - say on eBay - or put an ad in the local paper. The price they are getting on eBay may surprise you - check it out at:
http://www.goldprice.org/ebay-gold-prices/
IRS has insight into your profit margin on EBAY.
Or you could go to a coin show, held every weekend in a place within 150 miles of 90% of all Americans. IRS remains ignorant.
Your call.
Sun,
3% is a price few see here, I am sure.
5%-6% is more like it. on 1oz coins, (your scenario would be about right on Bars).
And the Fractionals?,.sheeesh.
I lucked into several.25 roos,at 2.5%,and .5 Krugs,@3% over, thought I had hit it big.LOL
"Bear in mind, customs officials in North America have unlimited authority to do whatever they want, even if you are well within the law." - The Groping Gorillas (aka TSA) will confiscate every last one as 'counterfeits' if you do not have a license to sell them.
The Pasadena police dept issued a warning two weeks ago that it was against the law to buy them or sell them unlicensed. Here's a link:
http://www.insidesocal.com/sgvcrime/2011/01/police-issue-warning-about-b...
.
Would it not be valid if the package of Pandas or Maples was marked as 'tungsten' when it contained a demonstrably bogus coin?
That would be a hoot! Tungsten-plated gold coins!
I think Rubin may be on the thread
[Edit: Forgot to add because you got junked, Rubin was a sarcastic allusion to the the Clinton administration and the alleged 400 oz bars etc. P.S. I didn't junk you. Your scenario is very poetic.]
You are on the right track, but need to go a bit farther. Buy pack of 10 tungsten electrodes, 5/32 inch diameter by 7 inch long from McMaster Carr for $73.30. Cast gold into duplicate of electrodes. Plate gold with tungsten. Replace tungsten electrodes in the package with the tungsten plated gold ($18,360 worth at $1350/oz)
Ship UPS or FedEx to anywhere, worst case pay import duties on $73.30 value of electrodes.
Sounds too risky... I'd just sell gold plated tungsten and use the proceeds to buy whatever (including PMs).
Hypothetically, a more practical scenario would be the situation where a box of 'said gold coins' is marked tungsten replicas because a demonstrably fake coin is included in the package and the shipper, if the the package was interdicted, could plausibly argue that he was shipping coins he believed were fake tungsten to be refined and tested later thus postponing declaration of any gold (amount unknown) and mititgating any additional penaties or seizures at customs. No harm, no foul?
Again, a hypothetical scenario I would not recommend to anyone, that's what lawyers are for...
three gold ads on the page too!
HOOKER BREATH!!!!!!!
I was also thinking of a pawn shop. Anyone know the basic margins you can make in buying gold jewelry and selling it to melters? Is the good margin at the pawn shop buying gold jewelry and selling it to melters or do melters buy it cheap and get the most margin?
how about home jewelry buying parties? what is the going rate for gold jewelry when people sell it for the gold?
The 1/10th oz gold eagle and 1/2 oz platinum eagle can be easily mistaken for a penny and quarter respectively if mixed in with common pocket change. If one wanted to move some metal around past TSA security that's how I'd do it.
on the other hand since 1979 the price of silver is down by 40% and the total amount of USD in circulation is up by a mere 800%.
You cherry picked a price that existed for about a single day over 30 years ago, and it is a price with which we are already familiar. Why do you think it is very relevant now?
I'm ready to be dazzled ... :)
Just cherry picking like you.
It is called the "Kahre Tax Trial"
here is one web snip. Not sure what kind of relevance to attach.
"Around noon on Monday, September 17th, a Las Vegas federal jury returned its verdict refusing to convict nine defendants of any of the 161 federal tax crimes they had been charged with. The charges included income tax evasion, willful failure to file and conspiracy to evade taxes.
The four-month trial centered around the family businesses of Robert Kahre who paid numerous workers for their labor with circulating gold and silver U.S. coins, and did not report the wages. The payments took place over several years, allegedly totaling at least $114 million dollars.
On September 20, 2007, three days after the federal trial's dramatic conclusion, the Las Vegas Review Journal, reportedly under a degree of public pressure, ran its first (and last) story about the outcome of the trial. To this day, with exception of the single article by the Review Journal, no major media entity has published a news story regarding the outcome of this important federal criminal tax case.
The censorship of this important news story is, unfortunately, not unexpected given the continuing, worldwide onslaught against the U.S. "dollar" -- specifically the Federal Reserve variety, and the ever growing numbers of Federal Reserve Notes required to trade for an actual ounce of silver, gold, oil, or for that matter, anything.
In short, this failed prosecution has coalesced and exposed truths our Government desperately needs to hide from the People: the truth about our money, the truth about our (privately-owned) central bank, and the truth about the fraudulent nature of the operation and enforcement of the federal income tax system.
-------
In other words, if a worker is paid with such coins, his taxable "income" (if any) can only be the face value indicated upon the coin money paid -- i.e., $1.00 for a circulating silver dollar or $50 for a circulating gold U.S. coin. Not surprisingly, the IRS has never issued any public guidance regarding this significant issue.
-------
The Review Journal reported the jury foreman claimed DOJ prosecutors admitted they were "shocked" by the outcome. "
Perhaps some legal eagle can dig the actual judgement up.
Please Scribd it, and provide a link.
Sounds like a good Johnny Silverseed idea for CogDiss.
Could anyone having their own business, under the above scenario, be well served to offer goods or services discounted by say 20% of the total as valued by the previous weeks closing price on silver in FRNs plus the equivalent value in FRNs of Eagles?
Income would only have to be declared on the now smaller FRN portion plus the face value of the Eagles; the vendor would begin to accumulate a good position in physical silver pushing the delivery price of the PM over time and the purchaser would be exposed to the benefits of investing and trading in silver legal tender as a hedge against taxes and FRN devaluation.
A win-win-win.
Next step: an open source mechanism where individuals holding physical silver begin to act like their own central bank for storage, wealth, barter and the liberation of individual goods and labor through their accumulated silver wealth, perhaps through an application as discussed on previous ZH threads vis a vis patented micro payment systems...
[Disclaimer: the above is not legal or financial advice...lol]
I think the IRS should be asked for an opinion.
"I am in a position to receive circulating American Eagles bundled with Federal Reseve Notes in hand paid as payment for services. American Eagles are declared legal tender (USC Title 31). This may be a taxable payment. I will want to defer taxation as long as possible. I may sell some of the American Eagles on the bullion market now or later. The payment is received from an unrelated party. On what amount are federal taxes due at time of payment, the dollar face value of the bundle or some other method of computation. [i.e. does the IRS recognize that american legal tender gold coin can actually be put into circulation by a private party]"
disclaimer: not legal or tax advice. I don't do that.
They only care WHAT you made off it, and / or lost.
Also, be aware they get a 1099 from the dealer, so they know exactly what $$$ value you recieved.
You will need to PROVE what you paid, and then the differnce between the two, is where they live.
They are simply looking for evasion of payment of taxes on that INCOME, and or taxes on Gains made off that income.
Bottom line, they are going to try like hell to get their pound of flesh, what is due them.
Isn't there a minimum amount on the 1099?
I must have been unclear.
I wasn't going to obtain it from a dealer.
I was going to "receive it in hand paid in exchange for services provided"
And see comment
http://www.zerohedge.com/users/fasttcar
below. It appears in the cited case he was trying to have it both ways...so perhaps on the barter/exchange side there is potential?
This partially explains why Tax Lawyers have such high billable rates, second only to good Banking Lawyers
;)
It looks like the guy was convicted in 2009.
"The jury found that Robert and Lori Kahre devised and used a payroll scheme that concealed and disguised
the true amount of income received by his employees and the employees of the companies for which he
provided payroll services. Robert Kahre maintained an office at 6270 Kimberly Avenue in Las Vegas
where he claimed to pay employees in gold or silver coins, but which were actually immediately
exchanged for pre-determined envelopes of cash. The face amount of the coins was one-eighth the amount
of pay that the employee actually earned and received in the cash envelope. The defendants told the
employees that the income was either not taxable or that they should falsely report to their income to the
IRS as the face amount of the gold and silver coins."
Here's the justice dept. press release on his conviction:
http://www.justice.gov/tax/usaopress/2009/txdv09_kahre08142009.pdf
Here's his sentencing press release:
http://www.justice.gov/tax/usaopress/2009/txdv09_kahre11172009.pdf
IMO, this part
was incredibly stupid.
Nice nuance from the blog below:
http://fskrealityguide.blogspot.com/2009/09/robert-kahre-vs-terrorism.html
[snip]:
It's a problem. 50% of the population has the parasitic personality type. If the State prosecutor picks a jury of 12 parasites, then a defendant is SOL. If the jury has 9 parasites and 3 people with the productive personality type, then the 3 might not be willing to confront the 9 and hold out for an acquittal vote.
Reminds me of awareness of a recent refinement of the false Hegellian dialect, from it's not a matter of right versus left to it's a matter right or wrong to most recently it's a matter of independent versus dependent.
Freedom of choice is only free when it's a choice.
http://www.youtube.com/watch?v=9jVoroHx3IU
Thanks and to http://www.zerohedge.com/users/artinlight below for filling in the story.
Wonder if coinstar gets a few bonus coins in their machines from ignorant people dumping their coin stashes for store credit to buy some Fruity pebbles and a national enquirer.
Once in Hong Kong, or anyplace else for that matter, why come back to the USSA?
Have you ever been to... or never been out of the USSA?
I only know about Robert Kahre as I built the web site for his first attorney.
Video of the first part of the story (goons forgot to destroy security footage):
http://www.veoh.com/browse/videos/category/news/watch/v6878980Xbk6T6PA
He won once - then the goons rigged things - and he lost (serving 15 years):
http://fskrealityguide.blogspot.com/2009/09/robert-kahre-vs-terrorism.html
Makes me so mad I wanna spit.
yes, 199 1 oz eagles
great post tnx RR
+1
Confusing price and value can be very expensive.
I don't get it. I pay my people and write off the wages against income. Why would I pay my people in gold and report 1/25 of the value? I'd be paying the tax on my people's income. I'm generous, but not insane. If the owner tried to pay them in gold but declared the full value of the gold, I can't see how the recipient would only pay the face value. Something misaligned here...
That is what really happened.
He paid his people in eagles and declared the pay in $50 dollar face value increments, but wrote off the value of the coins as an expense.
He LOST his case.
If he did not claim the acquisition expense, he would have been correct. However, he tried to play both sides and lost.
You can pay your people in gold coins at face value, but you can not deduct the cost of acquiring that gold for more than that same face value without breaking the law.
@fasTTcar
Thanks -- that completes the puzzle. He was a crook
Kahre didn't maintain an unrelated 'distance'
You certainly wouldn't want to pay your hourly chattel that way. They might insist on minimum wage in nominal.
Hangseng is selling eagles at HKD11,055 (USD1419) this morning.
Goldline is selling eagles at $1405 right now.
Am I missing something? How is Hangseng's gold the cheapest 'hands down'?
RTFA. The price listed online is not accurate. They don't sell online or over the phone, but only to walk-ins.
No, RTFP. I called Hang Seng this morning to double-check if there was any substance to this rumor, or potential arbitrage play (given I live in China, am in HK a lot, and travel outside of China). To be truthful, Simon Black has a very checkered past when it comes to gold and propagating vastly-misleading rumors.
Anyway, Hang Seng quoted that price I gave, should I, or had I have, walked in this morning. You'll save money buying gold elsewhere...Hong Kong is not full of morans who don't know the international worth of gold and localized value. HSBC is aligned with Hang Seng.
I don't understand the shining to Black Zerohedge has taken - this guy is anti-gold in my opinion.
The seduction of the deduction.
Sovereigns of the world don't make deductions. They're not accountable to anyone else. Ask a Saudi.
Kahre lost his case for a very simple reason. He ended up declaring a different value than the face value when he tried to use the coins as collateral and well as listed the market value of his asset when applying for a loan. You can't declare 2 separate values. If you are going to declare the value of the coin at face amount you need to spend it for the face amount. He tried to have it both ways. The courts don't like double-minded people.
My earlier warnings of parabolic Gold chart now confirmed.
I now expect serious downside for Gold and Silver.
http://stockmarket618.wordpress.com
lol
two trolls agree and here's another troll to say right on baby, gold to 200 before end of February