With gold prices sitting at record highs, Hong Kong jewellers and pawn shops have been hammered by one of the most sophisticated scams in which hundreds of ounces of fake gold were traded in the market.
The gold-mad city has woken up to a massive scam as investigators discovered that at least 200 ounces of fake bullion, worth about $250,000 have been traded at the island's fabled jewellery souks so far this year, Financial Times reported, in what could be a warning for gold obsessed Indians.
"It's a very good fake," said Haywood Cheung, president of the Chinese Gold and Silver Exchange Society, Hong Kong's hundred year-old gold exchange.
Though officially only 200 ounces of fake gold was recorded as traded, Cheung estimated that ten times that amount might have infiltrated the retail market.
Describing the swindle as "one of the most sophisticated scams to hit Hong Kong gold market in decades," the report said it came when gold prices soared to record highs of $1,400 an ounce.
In some cases, traders discovered a pure gold coating with a complex alloy with similar properties to gold. The fake gold had 51% purity, mixed with metals such as nickel, iron, copper, rhodium, iridium and osmium.
So real did the fakes look that even some of the Hong Kong's leading jewellers including Even Luk Fook Group was tricked into buying some before it put its chain of stores on alert.
"This was the biggest hit ever," said Paul Law, executive director of the firm.
Experts said sophisticated equipment was used to fake the bullion. In most cases, they passed basic scrutiny, only to be revealed later by more sophisticated tests involving high temperatures and chemicals.