Hong Kong investors are moving their gold offshore as China’s new national security law prompts fears of financial censorship. Some 10% of private holdings have been moved to safer jurisdictions such as Singapore and Switzerland since the beginning of protests in Hong Kong last year.
In a recent interview, Joshua Rotbart, head of Hong Kong-based gold dealer and storage provider J Rotbart & Co, said the new legislation has revived the bullion flight. “Many clients now perceive Hong Kong as riskier than other jurisdictions,” Rotbart said.
The development comes as the gold price peaked at $2,000 an ounce last week, its highest level ever. China is also in the mix as geopolitical tensions with the U.S. have pushed investors to the asset.
China’s new law is seen as a move to curb foreign influence from Hong Kong which has co-existed with the mainland economic giant in terms of the One Country, Two Systems policy since 1997.
Opponents fear that the legislation will compromise Hong Kong’s autonomy from China but investors specifically worry about stability in the world’s sixth-largest financial hub.
“Investors are moving gold from Hong Kong to Singapore because they don’t like risk and uncertainty,” Singapore-based precious metals analyst Ronan Manly told Financial Times, also citing fears of property rights and rule of law.
The precious metal regularly moves between the two territories, largely in kilobars, with Hong Kong’s main gold vaults run by the international airport.
Bullionbypost reports that China is the world’s largest consumer of gold but Hong Kong compares favorably as a storage destination because of mainland China’s trade restrictions.
Inflation fears during the coronavirus pandemic have made gold and bitcoin (BTC) increasingly popular stores of value, with the prices of both assets rising sharply in recent weeks. BTC is currently trading at just under $11,600 after rallying to an 11-month high of $12,000, according to markets.Bitcoin.com data.
During the financial uncertainty posed by the pandemic, experts have debated about the contrasting merits of gold and bitcoin as alternative stores of value.
The physical impediments posed by the precious metal to investors could highlight the relative immunity of “digital gold” to financial censorship.
What do you think about investors moving gold out of Hong Kong? Let us know in the comments section below.
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