Many investors store their gold “offshore” in Hong Kong, and yes, investors could lose all of their gold stored there. Here’s why… Is it safe to keep gold stored in Hong Kong right now?
“If you don’t hold it, you don’t own it.”
That’s the saying.
It’s relevant here.
You probably know that Hong Kong is in the midst of civil unrest, protests and riots.
Are those the words that can be used to describe what is going on?
Are there other words that can be used to describe what’s going on?
Regardless, here’s a sampling of some of the latest on the situation in Hong Kong, from Twitter.
We’ve got Molotov cocktails being thrown at police:
A protester was seen throwing a molotov cocktail towards police on the 8.31 #HongKongProtest . It’s suspected this protester could be another police uc, as he’s carrying a Glock19 pistol (few police units’ official firearm).
— Freedom HK (@FreedomHKG) August 31, 2019
Who may not be a protester at all at all but a police officer, a CIA operative, or an agent provocateur.
We have police brutality:
— Demosistō 香港眾志 (@demosisto) September 2, 2019
We are one step closer to Orwell’s boot stamping on the human face, forever.
And we have police saying they’ve been fire-bombed:
— Bloomberg TicToc (@tictoc) September 2, 2019
Which may or may not be what is happening.
One thing is for certain: Whatever is happening in Hong Kong is chock full of information, dis-information, news, fake news, propaganda and outright lies.
Which brings me to my initial question, is it safe to keep gold stored in Hong Kong right now?
Well, it depends on a little concept called “counter-party risk”.
A gold coin “in-hand” so-to-say, that is, gold that is safely and securely stored, has zero counter-party risk.
Which means that nobody else is in control of that gold coin, and nobody else can lay claim to it or far worse, take-it outright.
But gold stored in an overseas vault?
That is a different story, because the owner of gold stored in a far-away vault is not in physical control of the gold, which is another way of saying there is counter-party risk.
OK, “Hey Half Dollar, but that gold is insured, so if anything were to happen, the individual is covered!”.
Let’s think about that for a second.
Using a very specific example: Brinks.
You see, Brinks offers several things, including storage of gold in Hong Kong and in China.
Here’s a screenshot from Brinks website (yellow highlight added for emphasis):
Brinks offers plenty of services.
But wait, what’s that?
What’s that at the very end?
Oh, that’s a disclaimer.
And it is the most important thing on that webpage.
So let’s have a look at the “Brinks Global Services contract” to see what it says (yellow highlight added for emphasis):
I’m not sure about you, but to me, that pretty much looks like a blanket statement to remove liability on a whim.
Could what is happening in Hong Kong be considered:
- Civil War?
- Civil Strife?
Maybe so, maybe not.
But it doesn’t matter.
Well, the real kicker means that Brinks is not liable for your gold in the event of:
- “any hostile act”
I’m not sure about you, but I think pretty much anything happening in Hong Kong right now could be called “hostile”.
There’s a reason we say, “if you don’t hold it, you don’t own it”, and that reason is called “counter-party risk”.
It means that if your gold is held by someone else, there is the risk they lose it, and you can’t get it back.
What would happen if there was a “gold heist” where, hypothetically, all gold was stolen from Brinks?
Could Brinks claim that they’re not liable for the loss, based on the contract that was agreed to?
The gold “market” functions under a “just-in-time” inventory system of real, physical gold.
That is not hyperbole either, and we have countless recent examples of this system.
Here are some things we have seen in the gold market in the last few years.
It took years for Germany to repatriate its gold held in the United States.
Illegally mined gold from South America has funneled into Florida.
We have governments confiscating sovereign nations’ gold.
Venezuela is the most recent example of that scramble.
The point is the cartel is always scrambling for gold.
Which is why counter-party risk is important.
Especially as the cartel loses control.
They’ll get even more desperate.
If you don’t hold it, well then.
You might not get it back.
Safe and secure gold.
Within arms reach.
Has no counter.
– Half Dollar