Asset Protection Blog – Asset Management – Asset Allocation

In the last few months, I’ve noted increasing interest from clients wanting to take physical delivery of their precious metals holdings.  This appears to be a worldwide trend.  Colleagues in Switzerland, Hong Kong, and Singapore have informed me that many of the wealthiest investors in Asia and Europe are now demanding delivery of their gold holdings from bonded warehouses in London, Chicago, and elsewhere.  Then last fall, a report emerged that China’s central bank had discovered 400-ounce gold-plated tungsten bars among those it had recently received from bonded warehouses.  Assays were said to reveal at least four counterfeit bars, all supposedly from sources in the United States.  I’m not sure how much credence to give this story, and I’ve not been able to independently confirm it.  Indeed, Bob Meier, a colleague of mine with excellent contacts on the Chicago Mercantile Exchange doubts it could be possible, because all gold bars submitted to exchange certified warehouses are re-assayed to put them in “good delivery” status.  Since 1925, since the modern clearing corporation was developed, Bob says there has never been a seller/buyer or purity default for so much as one micron of metals. However, if you were going to make counterfeit gold bars, tungsten would be the ideal metal to use.  Tungsten costs about 1/3000 as much as gold, but has almost the exact density.  A tungsten bar plated with gold is almost indistinguishable from the genuine article, because it’s virtually the same size and weight.  Given this opportunity, it’s not surprising that you can buy gold-plated articles made with a tungsten core.  One source is a Chinese company called Chinatungsten.  The company’s Web site proclaims : “A coin with a tungsten center and gold all around it could not be detected as counterfeit by density measurement alone.” Larger gold bars are the most obvious targets for counterfeiters.  But recently, a gold refiner in Germany discovered a 500-gram gold-plated tungsten bar submitted to it by a bank.  Watch the video of his discovery here . The only way to detect a gold-plated tungsten bar is to perform an assay.  And just not any assay will do.  The relatively low cost x-ray fluorescence technique will not detect a gold-plated tungsten bar.  You need very expensive, specialized equipment to perform a non-invasive assay of the entire bar.  A physical assay costs less in most cases, but requires drilling into the bar.  So, how can you protect yourself?  If you’re a small investor, buy smaller coins and bars one ounce or smaller in size.  These sizes are small enough that a gold plated tungsten fake would have a very different feel and “ring” due to the brittleness of tungsten compared to the malleability of gold.  Also, buy from a dealer with an impeccable reputation, particularly if you store the gold, rather than taking personal delivery

Read this article:
Counterfeit Gold: How to Protect Yourself