Hello All
Here's a reality check about Gold bars.
Fakes do show up in the market from time to time, and they?re hard to identify. Generally speaking, counterfeiters don?t bother with the smaller ones, which are stamped, numbered, and sealed. They concentrate on 1-kilogram or larger sizes. These are poured, rather than stamped, and can be easily adulterated or even hollowed out and filled with some other, cheaper metal.
And that?s exactly what has happened, on a massive scale ? at least if you believe the rumor that exploded across the Net late last year, stating that ?someone? in Hong Kong had blown the whistle on thousands of tungsten-filled 400-oz. ?gold? bars that are now circulating throughout the world. Others picked up the story and ran with it, some going so far as to allege that Fort Knox is filled with 640,000 fakes. Either because we were duped many years ago, or because the government deliberately put them there to hide the fact that most of our gold is gone. Take your pick.
That tungsten was cited as the culprit is no surprise, because it?s the metal of choice if you want to imitate a big chunk of gold. Put some gold plating on tungsten and it will fool all the cheap, non-invasive tests, such as specific gravity, surface conductivity, scratch, and touch stone. For a conclusive result, you have to drill into the bar, take a core sample, and submit it to more sophisticated verification techniques ? fire assay, optical emissions spectroscopy, or X-ray fluorescence ? and that involves a lot of time, trouble, and expense.
The market, of course, long ago realized it would be a hassle to fully assay every large gold bar every time it changed hands. That would create bottlenecks all over the place. Thus, to facilitate liquidity and protect large traders, the London Bullion Market Association (LBMA) came up with the good-delivery bar system, otherwise known as the ?good delivery circuit.?
The system begins with a group of accredited refiners, all of whom have been certified by equally accredited assayers. The refiners manufacture the 400-oz. bars, applying their stamps and serial number before sending them out. Requirements for making and remaining on the LBMA?s good-delivery list are stringent, and those on it zealously guard their status. It?s of great importance to them because most of the vaults to which they ship product ? the next step in the circuit ? won?t accept anything but good-delivery bars.
This thing isn?t foolproof, nothing is, but it ensures a pretty decent paper trail, a formal, recorded history of who held the bars, when, and in which approved facility ? all the way from refiner to end user, whether that be an individual, a central bank, or an ETF. No buyer wants something from a non-accredited seller, and no one else in the chain wants to get fingered for supplying phony gold. That would get them kicked out of a very lucrative loop, and sued into the bargain.
What about gold bars that come from a non-accredited source or are otherwise circulating outside the good-delivery circuit? That could mean you. You?re not part of the circuit to begin with. And yes, if you bought something that wasn?t good-delivery certified, the possibility that you have acquired some fake gold exists.
If you?re concerned about the source, you might want to have your gold assayed in order to alleviate your worries. This will become an issue when you choose to sell. In that instance, a dealer will almost certainly require an assay as part of the bargain, even if you have the chain of custody paperwork and it all checks out. And you can?t blame him. There?s no way he can be certain of what you did to it while it was in your possession. The only exception might be if you have a long-standing, mutually trusting relationship with him, originally bought it from him, and are selling it back to him. But even that?s no guarantee. What you most emphatically want to avoid is the worst-case scenario: arranging a sale, then having your gold flunk an assay, laying you open to charges of fraud.
If you sell to another private owner, rather than a dealer, he will surely ask for an assay, and you shouldn?t be offended if he does. Nor should you hesitate for an instant to demand one if you buy from a private party. Although this is not a recommended way to acquire gold bars, it may be possible that something comes along that you can?t refuse. Just be very careful. If someone has a gold bar for sale but is in too much of a hurry to wait for an assay, walk away.
I cannot count the number of fake bars I have been offered.
Hardluck
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