Saturday, August 3, 2013

Fake Gold Coins/Bars‏

1) Hi, I wondered if you or your readers might know anything about
fake gold coin/bars from China cropping up.    It seems that tungsten
has almost the same density as gold and hence can pass the common
specific gravity test.
 China has most of the world's remaining reserves of tungsten and
some companies there are selling fake gold coins/bars on the Internet:
2) This is not speculation -- several fake gold bars , worth $100,000 , were found in
Manhattan a few months ago and others in Britain before that:
3) The German Government has stored its gold reserves in New York for 70 years (to protect
them from seizure by the Soviets during the Cold War.)   A few months after  the news
reported  gold fakes being found in Manhattan,  Germany announced that it would ship its
674 tons of gold back to Germany:
4)  However, fakes have also been discovered in Germany and Australia:
5) As word of these fakes gets out and becomes widely known, it may
cause the price of gold to fall as investors  sell in panic.   Bad money drives
out good.  Even if you have confidence that the gold coins you hold are genuine,
they will be of little value if most possible buyers will  not buy them for fear
they are fake.
5)  However, finding an alternative store of value is a difficult problem.  It is difficult
to distinguish synthetic gems nowdays from the real ones.   Platinum might be
a possible alternative.

Hi Don!
Yes, I'm aware of this problem and it´s only going to get worse as the price of precious metals (PM) increases. If we think of a post economic collapse society where PM are a big player, avoiding fakes and counterfeits would be a big challenge.
Even reputable people may end up selling gold they've had for years without knowing they are selling a bar or coin with a chunk of tungsten on the inside. This is happening right now.
I dont see this causing the demand or price of PM to drop based on fakes alone, but I do see a problem where there might be more distrust, and anyone that can verify the internal content of the PM (x-ray?) would sure get the most customers, so maybe there's a business idea right there.
As far as avoiding fake bars and coins, here are my recommendations:
1)Buy from reputable dealers. This should be obvious enough.
2)Buy recognized forms of PM. If you snatch some broken 14k or 18k junk gold at a fair price, broken chains or wedding bands as "PM pocket change", that's fine, but your bulk of PM should be in well recognized coins such as American Eagles. The more detail the coin has, the harder it is to counterfeit. Avoid those bulk bars of silver and gold that just have a stamp along with a card certification. Even original ones (like credit Suisse) have been bough, drilled and emptied on the inside and refilled with some other metal. They are original, the number and certifications are correct, but someone just removed most of the gold leaving just the outside layer. This is much harder to do with a small coin with detailed impressions.
3)Take a very good look at the images, letters and numbers on the coin. American Eagles have very fine, crisp details that arent easy to counterfeit. Counterfeits will often have slight differences, letters and numbers not looking as clean cut and the detail of the liberty image may look worn or blurry.
4)Stick to what you know. If you usually handle Eagles, that's what you'll know best. If you handle Maple leafs or Krugerrands most of the time, that's what you'll know and be able to tell between a counterfeit and the real one.
5) Small denominations are not as profitable to refill with another metal. While small gold coins can be counterfeited, there's greater chance of detecting it compared to a bigger bars that is impossible to notice any difference but may have some other metal on the inside. As long as you verify that its actually 24k gold with a tester, small, well recognized coins with plenty of detail are therefore your safest bet.

Oh! About European countries that kept their gold in USA. Did you know that many countries found out that most of their gold was missing when they actually looked into the vaults? The banks had... ehhem... somehow "loaned" that gold, and was hard to find its wearabouts.. if entire countries cant trust banks with their gold, neither should you! 

Take care everyone,



Don Williams said...

1) It occurs to me that it might be worthwhile to buy some of the fakes.

2) As we discussed here in the past, it would be useful to have an easily found , easily compromised safe in the house to divert burglars/armed robbers attention away from the real , hidden safe.

3) The decoy safe would be a much more plausible diversion if it had some fake gold coins/bars that would easily pass a robber's inspection.

In contrast, a stack of cut newspaper with some $100 bills around it secured with a rubber band might be discovered -- and would reveal the decoy nature of the safe.

You just don't want to mix the fake gold up with the real gold.

Don Williams said...

Another interesting thing is that platinum fell below the price of gold in 2008 as the depression hit -- in part because it is an industrial metal (automobile catalytic converters) and demand fell:

In the past year, however, it has moved up past the price of gold and is now about $130 higher.

TampaMark said...

While ultrasound is not workable on one ounce coins and bars there is another precaution one can take to detect tungsten counterfeits.

First, tungsten is paramagnetic, which means it will attract magnetic current weakly but still attract.

To detect tungsten you get a small rare earth magnet. These are very cheap but have a very strong magnetic current. IF tungsten is used to fill the gold to match the specified weight of the gold the rare earth magnet will attract to it weakly, but still attract. So one just nudges the magnet or gold towards each other until the magnet attaches to the gold, and there you have your counterfeit.

Anonymous said...

Used silver coins.
I've been buying Morgan silver dollars for this very reason.

Anonymous said...

just buy tungsten

Don Williams said...

Re Anon at 3:22 am

are you joking with us?

1) Fake silver coins have been coming into the USA from China as well:

2) If you google "fake Morgan dollars" you will see a lot of discussion in coin collector forums about fake Morgans.

Don Williams said...

Re TampaMark at 8:12 am:

1) I tried your suggestion with a strong magnet on a small coil of tungsten from a light bulb. The magnet did not seem to have any influence on the coil. Possibly it would show some effect on a bigger bar of tungsten.

2) I have seen some videos on Youtube where a technican at General Electic tests gold bricks with ultrasound -- similar to the device used to examine babies in their mother's womb or to detect fractures in steel rails. It supposedly can identify tungsten inserts.

3) However, the problem is that any test to distinguish fakes must be simple and highly reliable and give clear results -- else people will slowly abandon gold if there is some risk they will be fooled by fraud.

Too much money is at stake -- and people can't afford to have their assets turn out to be worthless --or not accepted for exchange because they are questionable.

I understand the shortcoming of fiat money (dollars) but it at least is AGGRESSIVELY protected against counterfeiting by the major resources of the US Government. Who protects gold?
Will Credit Suisse refund your money if you buy a fake gold bar with their mark?

Isaac Kahan said...

here are also a large number of nations whose notes clearly specify that the possessor of the note will be redeemed in gold as per the value of the note.