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Paper Gold & Gold Passbook Scams

GoldSilver.com - James Anderson


What if you thought you were saving gold, only to learn too late in this gold bull market, that you were merely saving counter-party risks with a bank? 

If you have a passbook gold account, also known as paper gold, it is highly likely a risk filled exposure to the spot gold price is all you own.

Over the last few years, we have had the opportunity to speak to a myriad of gold investors in Asia, particularly when establishing our segregated gold vault options in Hong Kong and our upcoming Singapore location.  

When speaking about gold investments with Asian investors, one has to always clarify the specific type of gold investment vehicle in question.  

Throughout Asia, although gold investing is seemingly prevalent and a culturally accepted phenomenon, one must always ask the direct question...

Do you own paper gold OR physical gold ?!

 

You see in Asia, many large banks offer what are popularly referred to as paper gold accounts or passbook gold accounts.  

Unlike outright physical gold bullion ownership, paper gold accounts and passbook gold accounts are anything but bullion.

 

What is "Paper Gold"?

The term paper gold means you have a piece of paper acting as a substitute for physical gold. 

With paper gold, you don't own gold; in most cases you don't even own a promise to receive physical gold. 

In plain english, it means you are a creditor of the party issuing the paper gold certificate or account, and thus subject to a myriad of counter-party risks and potential bankruptcy.  

Examples of paper gold are gold certificates issued by banks and mints, passbook gold accounts, pool accounts, futures accounts and many of the well known ETFs or exchange-traded funds. 

Although paper gold accounts may give you short term price exposure to the gold spot price, if paper gold demand dries, it will become worthless since many of these vehicles give investors no right or abliity to redeem gold metal or bullion.

Unlike passbook gold or paper gold, physical gold bullion in hand cannot go bankrupt and has no dependency on any other entity(s) fullfilling promises made.

 

Asian banks offering Paper Gold or Passbook Gold Accounts

In this article, we will concentrate on the true shortcomings of paper gold and passbook gold, specifically citing eight examples within the Asian banking system.  
 
Below, we explicitally cite content linking directly from Asian bank websites illustrating potential paper gold scams and potential passbook gold scams which Asian gold investors should be extremely wary of.
 

1. Hang Seng Bank - Paper Gold Account

Risk Disclosure Statement

- Credit risk of the Bank. Trading in paper gold through the Accounts is subject to credit risk of the Bank. There is no assurance of protection against a default by the Bank in respect of its payment obligations. In case of insolvency of the Bank, investors may lose their entire investment.

- Not protected deposits. Your investment under the Accounts is not principal protected. The Accounts are not protected deposits and are not protected by the Deposit Protection Scheme in Hong Kong. Repayment under the Accounts is not guaranteed by the Hong Kong SAR Government's Exchange Fund.

 

Goldsilver.com only offers fully insured segregated gold vault options.

Customer's segregated gold bullion holdings are never held on the books of GoldSilver.com and are an asset solely for the beneficiary(s) of the sub-account. 

If GoldSilver.com were to ever go out of business, customer's gold sub-account holdings would remain unaffected.

 

2. Shanghai Commercial Bank Paper Gold 

What are the Major Features of Paper Gold?

- No physical gold delivery is involved in all purchases and sales, so no security, insurance or storage problems.

Risk Disclosure Statement

- Paper Gold is not the same as nor should it be treated as a substitute for normal deposits or physical gold.

- Paper Gold is not principal protected and is not protected by the Deposit Protection Scheme in Hong Kong.

- Investing in Paper Gold is subject to the credit risk / insolvency risk of the Bank. Upon insolvency of the Bank, you may lose your entire investment amount and will become an unsecured creditor of the Bank regardless of the performance of the Reference Asset.

- Paper Gold does not involve delivery of physical gold. You have no right to obtain physical gold. The balance of your Paper Gold maintained at the account is not representing that you have any right, ownership and possession of physical gold. 

 

GoldSilver.com only offers physical gold bullion and physical silver bullion, no paper.

All segregated sub-account gold holdings have rightful ownership and possession of physical gold, including the right to demand and take physical delivery.

 

3. HSBC - Gold Passbook

A10: How do I invest in precious metals?

Precious metals have been a source of investment for hundreds of years. Gold is the most widely used precious metal investment in many countries, but it is also possible to deal in silver and platinum, and even copper and tin. 

Because of the popularity of gold, there are many ways to invest in it:

- Physical gold. You purchase actual pieces of gold, which can take the form of coins, taels, bars or jewelry.

- Paper gold. To minimize the risk of keeping physical gold, you can instead buy and sell gold in the form of certificates. These certificates will carry your name, so only you can sell them.

- Gold passbook account. This is where you save gold as if it were money. Instead of earning interest, you gain a return when the price of gold rises.

 

Different from most commercial banks, we fully understand that gold is true money.

Gold bullion is very different than any paper machinations banks or governments have ever invented.  Unlike their always dying fiat currencies, gold is money for it holds its value over the longterm ( thousand upon thousands of years ). 

 

4. UOB Singapore - Gold Savings Account

Gold Savings Account

- You can buy and sell unallocated gold - through a passbook - at prevailing market prices and transact any time during banking hours from Mondays to Fridays.

- Investments in gold are not deposits.  This product is therefore not an insured deposit within the meaning of the Deposit Insurance Act (Cap 77A). 

 

GoldSilver.com offers fully insured, fully allocated, and fully segregated gold vault options including a soon to be available Singapore gold vault option.

 

5. Maybank - Gold Investment Account

10. PURCHASE PRICE 

- The price per gram at which each purchase will be made by me shall be the selling price as quoted by the Bank to me at the time of the placement of the purchase order. The selling price so quoted shall be determined by the Bank at the Bank’s sole and absolute discretion taking into account all factors the Bank shall deem relevant including the prevailing world and local market conditions for gold, the exchange rate between United States Dollar and Malaysian Ringgit and the gold fineness. 

- 11.1 The Bank shall not be under any duty and/or liability in any circumstances to appropriate set aside and/or allot any gold for the time being from time to time held by the Bank to me and/or any of my MGIA and I shall have no right and at no time be entitled to demand and/or request such appropriation setting aside and/or allotment,

 

The prices we offer you for your gold bullion are set by prevailing market rates.  Although we always offer competitive bid prices, customers can not only sell their segregated sub-account gold bullion to us, they can also choose to sell their gold bullion to anyone in the market.

At GoldSilver.com, gold sub-account holders can always demand physical delivery of their sub-account's gold bullion holdings.

6. ICBC - Industrial and Commercial Bank of China - Paper Gold Scheme

Schedule 6: Paper Gold Scheme Account

3. Delivery

- 3.1 We will not in any circumstances deliver any physical gold to you, and will not hold any physical gold for your account. The allocation of units in your Paper Gold Scheme Account is notional. You have no right to any physical gold but only a right to receive the proceeds of the Paper Gold in your Paper Gold Scheme Account on settlement of relevant Contract(s) to sell the Paper Gold.

 

With GoldSilver.com, gold sub-account holders can always demand physical delivery of their sub-account's gold bullion holdings.

 

7. ANZ Singapore - Gold Account

Why invest in an ANZ Gold Account?

Safe and secure gold investments

- Unlike physical gold, bullion coins and gold bars, you need not worry about purity levels, storage costs or security risks with an ANZ Gold Account. The ANZ Gold Account provides you with a simple, secure and convenient way to hold and transact paper gold.

Minimum investment quantity

- 30 troy ounces for purchasing, selling and maintaining 

 

GoldSilver.com stands 100% behind the authenticity of every ounce of physical gold and silver bullion we sell. 

Only 1 oz of gold is required to begin a gold vault storage account.

 

8. Bank of China - Precious Metals Passbook Account 

Risk of notional precious metals passbook account

- Your purchase of precious metals for the account does not represent a purchase of physical metals or a deposit of money. You will not have any interest in any precious metals owned or held by us or be entitled to physical delivery of precious metals.

 

Your purchase of precious metals for your gold or silver vault storage account always represents a real purchase of physical precious metals.

You will have 100% interest in precious metals purchased, delivered, and owned from our website.  

Your precious metals can be held by a third party vault storage facility, while you remain entitled for physical delivery of your metals at a future date, if you so choose.

***

GoldSilver.com - Segregated Gold Vault Options

Segregated Gold Vaulting

Are you interested in the safest, most cost effective, and secure gold vault storage services in the precious metals industry?

Our strategic partnerships provides GoldSilver Insiders the ability to attain third party, fully insured segregated gold vault storage around the world.

With segregated gold vault storage the gold bullion products you purchase are held solely in the beneficiary title(s) you elect. The original bullion products you buy are always stored separately never swapped nor comingled with other accounts.

Gold vault storage customers receive custody certificates documenting holdings and account inventory levels. All physical gold vault storage bullion holdings are a secure phone call away from door delivery or can be quickly sold at a competitive sellback price.  

You deserve to own physical gold bullion outright!

Click here for more information on our gold vault options.


The information, opinions, and financial data presented are for educational purposes only and are not intended as investment advice. No guarantees are made as to the accuracy of the information provided herein. Situations can change from day to day. Every investor should do their own due-diligence to determine which investments are best for them.
You must assume the responsibility and liability for all decisions that you make on the basis of the information herein contained. GoldSilver.com, makes no warranties, expressed or implied, as to the fitness and accuracy of the information provided or for the results obtained by using the information. Those making investment decisions based on any of the information presented should do so in the knowledge that they could experience significant losses. In no event shall GoldSilver.com be liable for direct, indirect, or incidental damages resulting from the use of the information.