What fear drives Hong Kong’s rich to secure gold now?

Hong Kong’s so-called wealthy draw increasing amounts of their gold holdings both privately held and reserved in currency centers. It happened after the Beijing government enforced a new national security law last month. Approximately 10% of the physical gold moved abroad. 

According to Joshua Rotbart, director of J Rotbart & Co, a Hong-based gold dealer, private sector investors, and financiers have moved their physical gold to nations such as Singapore and Switzerland in the past 12 months. 

The first anti-government demonstrations on the island, which was a British colony until 1997, began in 2015. After returning to China, Hong Kong was ruled under the two systems arrangement, having some autonomy and rights. The bill withdrew in September however demonstrations continue. Now they demand full democracy and an inquiry into police actions.

Clashes between activists and police have become more violent. Police are firing bullets and demonstrators attacking police officers, throwing petrol bombs.

Investors don’t like risk and uncertainty

Financial investors worry about political unpredictability and the guidelines of the law. Customers view Hong Kong as a higher risk location, stated Rotbart.

After the national security law passed, Hong Kong homeowners instantly acted to save their gold elsewhere.

Pro-federal government political leaders argue that the security law, which targets terrorism, subversion, secessionism, and foreign impact, was necessary to mark the line for demonstrations and restore stability to Hong Kong.

However, critics worry that the steps will weaken Hong Kong’s guaranteed legal and political autonomy for 50 years after its handover from the UK to Chinese sovereignty in 1999.

Ronan Manly, a precious metals analyst at Singapore-based BullionStar, commented that investors are moving gold from Hong Kong to Singapore because they don’t like risk and uncertainty.

Chinese authorities claimed the law was necessary for security reasons. Yet, critics say it imposes authoritarian control over the island and violates Hong Kong’s “One Country, Two Systems” policy that has been in place since 1997.

Many said that stability and the rule of law are concerns that prompt investors to extract gold from Hong Kong. They could lead to concerns about the safety of the bullion and even the certainty of property rights.

Some analysts have said the law could pave the way for companies to relocate their operations to neighboring Singapore. It could undermine the position of the world’s sixth-largest financial center, as they call it.