Simon Black On "Hands Down, The Cheapest Place In The World To Buy Gold Coins" And Some Arbitrage Opportunities

Tyler Durden's picture

Hands down, the cheapest place in the world to buy gold coins,

by Simon Black of Sovereign Man

Date: January 17, 2011
Reporting From: Santiago, Chile

For anyone looking to hold gold as a store of value or even medium of exchange, major gold coin issuances like the Eagle, Maple Leaf, and Krugerrand are advantageous because they're recognizable worldwide.

You can do business in a coin shop anywhere in the world from Vancouver to Vanuatu with one of these coins; bulk bullion, on the other hand, needs to be specially weighed and assayed by experts before being traded.

For this reason, the premiums for which gold coins sell tend to rise substantially in crisis periods when demand for physical metal is high. In the initial days of the 2008 financial crisis, premiums shot up from 4% to well over 10%, even though the price of gold was simultaneously falling sharply.

Today, with gold routinely taking out its all-time highs, gold coin premiums around the world have remained fairly high-- this is one of the things that we typically look at here at Sovereign Man as we constantly travel the globe... and why what I'm about to tell you might have you falling out of your chair:

Tim Staermose, one of our Asia partners, was in Hong Kong last week, and he conducted his normal rounds of the various banks in the Central business district that sell gold bullion coins over the counter to walk-in customers such as Hang Seng Bank, Bank of China, and Wing Lung Bank.

At Hang Seng Bank, Canadian 1 Oz Maple Leaf coins -- in pure, 24 karat gold -- were available for cash purchase in Hong Kong dollars at just 0.5% above the prevailing spot price of gold. 

This is dirt-cheap... or as they say here in Chile, 'precio de huevos', and it certainly presents an interesting arbitrage opportunity. Depending on your objectives, however, there may be even better gold coin buys in Hong Kong at the moment.

Over at the Bank of China, for example, the Chinese Panda coins were quoted at 4.9% above spot gold. 

Personally, I think the Panda is one of the most beautiful gold coins of all, and in North America they typically sell for much greater mark-ups above the spot price of gold than most other coins, often over 20%. In the UK it's even more. 

Many collectors value the Pandas simply for their aesthetic beauty; and it probably doesn't hurt that the dealers authorized by the People's Bank of China to sell Pandas in the US have a virtual monopoly on the market.

Still, this situation can be exploited to your advantage-- the difference between the buy price in Hong Kong and the sell price in North America is roughly $275 per 1-ounce coin.

If I had nothing to do and were looking for some adventure, I'd raise some grubstake to fly to Hong Kong, buy coins, and sell them back home at a profit to pay for the trip... or better yet, offer a fee-based service to gold coin investors to buy cheap coins in Hong Kong on their behalf.

For other folks who haven't yet built up a stash of gold bullion, I would urge you to consider taking a trip to Hong Kong to get started; I'm certain that the money you'll save will more than pay for the flights, and a nice holiday for you and your loved ones as well.   

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lunaticfringe's picture

Didn't I read somewhere that a Chinese Bank is opening it's doors in the U.S? Just where might I find such a bank?

bigdumbnugly's picture

from the sounds of it pretty soon i might say any jp morgan.

ED's picture

3.40pm HK time

Gold Spot 1366

Hang Seng - never had Pandas and no Maples

BoC - Pandas 999 - out of stock HKD 11085

BoC - Maples 9999 - a couple in stock, perhaps - HKD 11092 (approx USD 56/4.1% over spot).

Boy! You guys are fast!

On the other hand, cant see the Chinese selling anything for a bargain. Not in their genetic makeup. I wonder whose Simons HS contact is?

Geoff-UK's picture

If there were any government anywhere in the world more likely to find a way to lie about the gold content of their coins, I'd put my money on...er...well, the USA, but China would be a very close second.

 

Philharmonics, Maple Leafs, and Krugs FTW.

Sudden Debt's picture

I've heard they bought this old house on 1600 Pennsylvania Avenue
Washington D.C., DC 20500.

Once the paint-job is over (The building will be painted in Communist fashionable Red), they'll move in. There also still seems to be a problem with the current renters who don't yet realize the place is sold.

Anarchy99's picture

Now that was funny.

 

But true.

Yes We Can. But Lets Not.'s picture

Let me be perfectly clear: the wife, the girls, the mother-in-law, Bo and I are squatters...

Money Squid's picture

I am looking into opening an account with the Bank of China as long as the money is "stored" in Renmimbi, not USD. Jim Rodgers keeps saying he is buying Renmimbi when ever he can but it is not for sale often. As I have little experience "purchasing" money or trading forex I thought a Renmimbi account might be the best way to go, especially if I can withdraw the money out side the US.

hellboy's picture

I checked and cannot agree with Sovereign Man...

 

Check this out:

In the UK - 1oz GBP 917

http://www.taxfreegold.co.uk/weselloneouncebullioncoinsourchoice.php

In Hong Kong - 1oz GBP 1010

http://bank.hangseng.com/1/2/rates/gold-prices/gold-prices

 

I also called up a few Hong Kong banks to check if the website prices are correct and yes... So dont book your tickets to Hong Kong, well not to buy Gold coins anyway... 

 

TheProphet's picture

You can get Renminbi from any currency exchange business or from your bank. You will pay a premium averaging 10% over the fixed exchange rate. but if you believe it will significantly appreciate in value...

Misstrial's picture

Money Squid:

Everbank for you, my friend. They have CD's in renmimbis.

~Misstrial

Misstrial's picture

lunaticfringe: In Irvine, CA, there are two Chinese banks: EastWest Bank and Omni Bank.

Question for gold owners: is there a color difference between a Krugerrand and a Roo or a Panda or a Maple Leaf?

I  am aware of the gold content difference between Eagles & Buffaloes for example, however, I would like to know if various geographic regions produce gold coins with color differences.Hope I'm being understood here.

Also: anyone watching Alaska Gold Rush on the Discovery Channel?

http://www.youtube.com/watch?v=S6neZD6OpMk

One old miner showed a panful of gold nuggets that looked to have been melted down. About $70k-$100k of gold (imo) in the pan. The color of this Alaskan gold was lighter yellow.

~Misstrial

Tangurena's picture

Bank of China. And they even let you open RMB denominated accounts. Plus, the deposits at either of the (2) NYC branches are FDIC insured.

http://www.bocusa.com/portal/Info?id=649&lang=1&

Thisson's picture

All fiat is trash.  What difference does it make if it's green trash or red trash?

bernorange's picture

Lots of smoke about counterfeit Pandas.  Caveat Emptor.

tmosley's picture

From Ebay, not the PBoC.

Of course, this means you may have trouble selling them when you get home...

tmosley's picture

Stupid article.  The author doesn't know anything about gold or the factors affecting its price.

He even says the Fed isn't printing money, for fuck's sake.

traderjoe's picture

You beat me to it. Yes, stoopid article. And the Fed's policies could be revoked 'at any time'? Dumb.

DosZap's picture

10/4,

I am SICK as hell of these yokels, basing their predictions on what and where PM's will go.

Using an 1980 model is insane..The USA was the Worlds largest creditor then, now its the 100% opposite.

This alone with our debt ratio , and percentage of GDP to debt, is mind boggling.

Also, no other nation on earth had the issues we all face today.You cannot even make a comparison, simply because its DIFFERENT this time.

VERY different, like, as in the world has never been in such a jam.

With no way out.

Read an article (forget where), the author said that for every Trllion in new debt we add, the price of gold should be $4k per oz higher.

LowProfile's picture

Sell their physical gold?  ...And buy what, exactly?

Re: One of the points in that blog post:  Capital always goes where it is treated well.  Europe figured this out a long time ago.

You are the very perfect picture of a monumentally stupid motherfucker, you know that?

If you meant paper gold for trading, then I preemptively retract that.  But if not, you are a monumentally stupid motherfucker and deserve to be a poor-ass bitch shinin my motherfuckin' shoes!

Uncle Sugar's picture

I junked you. I guess the Bernank isn't literally printing paper dollars, but giving electronic money to the PD's which then go to the Treasury to fund the gov't is the equivalent to printing money.

naughtius maximus's picture

Wow very interesting. I'm selling the real thing(?) on ebay right now. If that coin didn't say copy on it I'd be fooled by the picture. As you can see I'm not a coin expert. 

RockyRacoon's picture

Dear, Living_Stone, the definition of counterfeit does not include those clearly maked as a copy.  Those are legal.  It's not the ones marked "COPY" that you need to worry about!

Be sure to watch for these passed off as genuine:

http://coins.shop.ebay.com/Bullion-/39482/i.html?_nkw=mills&_catref=1&_f...

Anything sold with "mills" in the description is going be found soon in low-priced "hoards".

This is why it's best to stick with the known coinage.

JW n FL's picture

DECLARE BITCHEZ!

Cheesy Bastard's picture

Not such a good price for tungsten

JJSF's picture

Problem with brining them to the States or EU is that you limited to $10K USD's worth when flying international and unless your flying direct you will probably have to go through a number of security points in various airports en route.

tmosley's picture

No, $10000 is the amount you can take without declaring it.  You can take as much gold or silver as you want, so long as you declare it.  In this case, you are acting as a bullion importer--a perfectly legitimate trade.

Rahm's picture

So I could and pick up $.5m worth of gold maple leaf's, and carry them on with me, with no problem clearing customs?

DoChenRollingBearing's picture

I believe tmosley is right re US law.  So the answer is yes.  Have to declare them, do not fail to do that or you could be in BIG trouble.

Re Europe, I do not know, but I think it is OK as well, but have to declare as well.

...

Nice easy CAPTCHA.  Why can't they be easy late at night?

High Plains Drifter's picture

There is no freakin way I am carrying any gold coins on me in any airport. On that you can make bank for sure. 

MachoMan's picture

let alone half a mil worth...  although, it wouldn't be prohibitively heavy...  you could carry it on...  but, jesus...  trying to explain you're able to bring it on the plane after declaring to a minimum wage earner is going to be harder than getting half a mil to start with...

[had a bad experience at JFK coming back from an international trip...  was stupid enough to declare a reindeer pelt...  the stupid mother fucker took it out of its bag and started petting it and asked "what is this, a rabbit?"...  yes, it's the world's only 200 lb rabbit...  we've solved world hunger...  please keep rubbing it while I go try and kill myself on the escalator]

BurningFuld's picture

You need to declare more than $10,000 at US customs because if you are bringing more than $10K they want to know the source of the funds. So if you travel with a bunch of Gold have a bank statement showing a withdrawal to cover your purchase for example and be prepared for questions.

DosZap's picture

Just make sure to buy DENOMINATED coins.

Krugs, etc, without a face value, legal tender use, would cause the coins to be priced at SPOT.That would severly limit the amount coming in.

Also, the guy did have a TRUTHFUL Comment..........(plus where he was,maybe was a different deal altogether,cuttinfg some slack there, WHY would he lie?).

Just in India, their Prems are very low, except there is a VAT tax on Gld & Slvr, and if I remember its 7.5% on Gld,and 14%+ Svlr, why I have no clue.

savara's picture

In India VAT on gold and silver is 1% only

tmosley's picture

According to the law, you shouldn't, but no-one follows the law anymore.  At least not in the West.  I would make multiple trips so as not to place all of my eggs in one basket, should some greedy TSA asshole try to take it for himself.

 

Drachma's picture

Customs goons would find some way of depriving you of your property.

naughtius maximus's picture

Better hope that the people in customs are honest!

TheProphet's picture

If you declare it they might attempt to make you pay taxes on it? You will have to give a value. Would a better plan be to put them in an old coin purse you brought with you from home, and if you get stopped, say you carried them with you from home?

Hypothetically, of course...

Eric The Red's picture

Getting through screening with a pocket full of gold is something I would be afraid to try.  Doesn't even matter what the regs or laws are.  I'm sure I'd end up with the strip search of a lifetime.  Woo Hoo!!!

economessed's picture

For those of you who don't have the resources or time to exploit the gold price differential, you can always explore bottle deposit arbitrage (also known as the Seinfeld Mail Truck strategy), which at $0.05 and $0.10 between state borders has a 100% return potential, and none of the 1099 tax implications.

Cheesy Bastard's picture

LOL.  The gold price differential thing could work if you could hitch a ride with the president of Tunisia...

Zeroexperience2010's picture

We had something similar in Europe: the Germans create a recycling tax for PET bottles (25 euro cents), which doesn't exist for example in France or Belgium: you could buy Vittel or Evian in France, and return the bottles in Germany: 25 cts net profit per bottle. Now they (the high tech Germans) have designed a special ink, with a very controled distribution system that is used to print a logo on the German market bottles, so that only German bottles get a 25 cts refund...

Before this, I heard rumors that some Eastern country citizens made bottles, just to recycle them in Germany (not buying water)

JW n FL's picture

no one liked the metaphor of swimming and this bullshit story? my bad, carry on!