The Financial Times described the swindle as "one of the most sophisticated scams to hit the Chinese territory's gold market in decades", and comes as the price of gold sits around record highs around 1,400 US dollars an ounce.

"It's a very good fake," Haywood Cheung, president of the Chinese Gold & Silver Exchange Society, Hong Kong's gold exchange, told the newspaper.

Cheung told the FT that jewellers and pawn shops in the gold-mad city have discovered at least 200 ounces of fake bullion -- worth about 280,000 US dollars -- so far this year.

But he estimated that 10 times that figure could be making its way through the city's retail market, the paper said.

Among the fakes was a specimen with pure gold coating that masked a complex alloy with similar properties to the precious metal, suggesting fraudsters used sophisticated techniques and equipment, according to the report.

The fakes are difficult to detect by sight or touch, and are usually revealed by high-tech tests involving high temperatures and chemicals, the report said.

The Luk Fook Group, one of the city's biggest jewellers, was also tricked into buying almost 12,000 US dollars worth of fake gold until it discovered the scam and alerted its retail stores, the paper said.

"This was the biggest hit ever," Paul Law, the company's executive director, told the FT.

The scam targeted the sale of scrap gold to jewellers, not the bigger market for gold bars which is more rigorously controlled, the paper said.

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