Wednesday, April 14, 2010

Counterfeit gold, how real is it

Faking or counterfeiting gold has been a popular pastime for criminals out to make a fast buck for hundreds of years. From using 'fools gold' to steel and lead coated gold to the now modern sophisticated pastime of tungsten coated gold bars.

Alarming as this sounds, coating other material in gold is, in itself, not a criminal activity. Gold plated copper in jewellery has been common through the ages and made owning gold affordable to many who were not in a position to buy solid gold jewelry and the coating tungsten in gold is definitely not new either. There are companies around that do this on a regular basis including Chinatungsten which has been in operation since 1997 and is one of the biggest produces of tungsten jewelry in China

What is of concern however is the possible deception of LDMA gold bars being really tungsten coated in a layer of gold as has been discovered recently.

When it comes to faking gold bars tungsten is the ideal metal. With a density and weight fractionally close to gold it is difficult, if not impossible to tell the difference between a genuine gold bar and a tungsten coated bar.

When the news of the tungsten gold bars surfaced in Hong Kong it was first assumed they were manufactured there. After all China has the reputation of being the biggest knock-off capital of the world. However the amount of gold bars in question was allegedly between 5,600 and 5,700 – 400 or around 60 metric tonnes. Such a sizable amount would have to be organised by a well financed and resourceful organisation.

Within hours of this scam being identified, the Chinese officials had most of the perpetrators in custody and apparently uncovered the following:
Roughly 15 years ago - during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day. I know folks who have copies of the original shipping docs with dates and exact weights of "tungsten" bars shipped to Ft. Knox."
Rob Kirby, Gold Seek

The balance of this 1.3 million – 1.5 million 400 oz tungsten cache was also plated and then allegedly "sold" into the international market. So the global market is literally "stuffed full of 400 oz tungsten coated bars".

Now, the two biggest gold exchange traded funds, StreetTracks and SPDR, both have their gold bars held by the LBMA Banks. When you consider there are well over a billion dollars in deposits with these two trusts, the GLD itself holds over 1117 metric tonnes of gold bullion than the central banks of China, Switzerland, Japan, Europe and India, then it becomes a big matter that so much of the gold is likely not really gold at all but tungsten with a coat of gold over it.

Why not make fake gold coins with tungsten some might ask. In fact just by weighing the coins you can tell the difference. As coins are circulated more, as distinct to a gold bar that will sit in a dusty bank vault for years on end, they are more likely to be detected. The credibility of gold bars lies more in the paper work and tracking of each individual gold bars number than handling. It also cost 50,000 dollars to manufacture a 400,000 dollar gold bar taking into account the cost of the gold and labor. Fake tungsten gold coins would be too expensive to manufacture each. Not only that gold coins have a lot of detail, ridges on the sides etc and there are many people out there than can detect fake coins so it is economically unviable to fake gold coins.

It is a good idea then to invest in real gold rather than paper gold and ensure that the gold you are investing in IS gold and not some counterfeit. Especially with the probably impending rise of the gold price.

No comments: