Fake 10 oz. Gold Bars
(Don't worry, paper money is an infinitely bigger scam.)
Silver Stock Report
by Jason Hommel, September 26th, 2012
Fox News has a video of the bar:
Patrick Heller has commentary on this topic, on which I disagree, and I rarely disagree with him:
Some people are needlessly in a panic, and since I'm a bullion dealer with a bit of knowledge and expertise, I'd like to bring the voice of reason to the table. There is no need for any hysteria.
My conclusion is that this is not a conspiracy to throw physical gold or silver into question, but rather, it is likely the work of one individual who found a way to scam some dealers, which is impressive, because dealers don't often get scammed; it's why they are in gold in the first place. The thief will get away with it only this once, maybe, if they don't catch him, and here's how they will catch him, and prevent this from ever happening again.
The sale of these 10 oz. gold bars had to be either for cash or wire. A fraudster would not likely give his name to be put on a check. If it's a wire, then the seller can also be easily identified, so that's not likely. That leaves cash as the likely form of payment!
If it was cash, since it was over $10,000, and closer to $17,000 per bar, there should have been a CTR cash transaction report, with a social security number, which would also identify the counterfeiter. If no CTR exists to identify the seller of the bars (and no smart seller of the bars would go for putting down valid info on a CTR), then the bullion dealer kind of broke the fincen.gov Federal Money Laundering regulations!
So, it's likely that one of the two parties is in trouble!
(And if a dealer violated Federal law, he is not likely to do that again, especially not now that there is a Federal Investigation!) But since the first report of these fakes was from a "dealer to dealer" trade, this explains why one of the dealers spoke up, because the second dealer in the dealer to dealer trade likely fully documented the trade.
I'm thinking that this was a small operation by an individual jeweler who looked for dealers who would not require a CTR on cash transactions, and who did not hit the same place twice, and who only sold as much as he could get away with, limited usually by the "cash on hand" of the bullion/jewelry shop to whom he sold the bars.
Thus, it does not require a "global remelt" or re-assay of all bullion.
I don't see this as a kind of Federal false-flag conspiracy operation to try to call all gold into suspicion, and it doesn't do that for me yet. I would begin to worry more if the world reports gold eagles, or any single one ounce gold coins, filled with tungsten.
And since Gold Eagles are US Currency, counterfeits of those would be under the jurisdiction of the Secret Service for investigation.
Of course, if they can do it with a 10 oz. bar, they can do it with a 1, technically speaking. But so far, they didn't. Think about why not. And this brings me to silver.
So, how do we know that silver rounds that we buy and sell are not fakes?
Well, we just heard of fake ten oz. gold bars, not 1 oz. gold bars. The reason is likely because the time and energy it takes to make a fake must be substantial.
Clearly, these were hand made, hollowed out or sliced open bars, also created at risk. There would be no incentive to hand craft silver fakes, as the profit would not be there, as it may have taken thousands of dollars in skilled labor to make these fake tungsten gold bars. Nobody would spend thousands to make a really good fake $35 piece.
Furthermore, there is no equivalent of tungsten for silver. Tungsten weighs nearly the same as gold, there is nothing that weighs like silver.
Would a mint make fake silver rounds? No.
Mints can make everything from video game tokens to casino chips or copper rounds.
If a mint made a fake, the mint would be prosecuted, and shut down, and there is no incentive to put over a million dollars worth of machines at risk to make $100,000 in fakes.
Besides, machines don't make fakes.
The best machine-made silver coin fakes in existence are the US government issued common coins with the copper in the middle that you can see. Plated items do not wear well, they bubble or peel. Clad items show the different metal on the side, as common coins do, when the blanks are punched out of a strip of metal by machine.
Thus, the fake 10 oz. bars are likely hand crafted.
Yes, we do test the purity of the silver rounds we have. Weighing works. Also, the look, the feel. Plated items are easily detected by hand, as plate bubbles, and it leaves a "smooth" look and feel to the coin as it's like paint that smooths out the stamped image and fills in the lines and grooves. And also, for plated items, the weight is often off by 30%.
We have cut into a number of silver rounds over the years, and we've never detected a fake from our regular suppliers.
We have bought silver fakes from the public, because the customer does not know they are fakes, and they typically sell only like 3 at a time, and we are moving fast on the small trades, and we did not examine them closely enough. We all learn. These days, every trade is double checked by at least two people, to try to avoid such mistakes. The fakes we bought were plated buffalo copies, did not even say they were silver, etc. It was a simple mistake that should have been easy to see, unless you are just not paying attention or in a rush.
And again, it was only a handful, and in the silver, it was not a sting operation, and does not make me suspect the rest of my bullion.
In conclusion, there is no need to re-test or re-assay any of your own bullion. It's likely that 99.99% of all the bullion out there is 99.99% pure. And if that's not good enough, I don't know what is.
The fact that the bullion world is abuzz with this story goes to show how ultra rare these kinds of fakes are. They are so rare, and there are so many bullion dealers, I wonder what these fake bars would sell for on ebay? Might even sell for more than the gold, after all, the artistry was supposed to be superb, and doesn't good art always sell for more? Anyway.
We have never recommended 10 oz. gold bars, for an entirely different reason. Gold bars are NOT wildly popular with the public, in fact, they are very rarely purchased or ordered by the public. In three years, I think we have only traded two of them, and two kilo gold bars.
Gold is money when it is fungible, meaning that every piece is similar enough to other pieces as to be easily exchangeable. A 10 oz. or a 31 oz. gold piece is a large chunk of capital to put into a less desired, "non-moving", not popular form. Also, when a 10 oz. gold bar is encased in a large piece of plastic, you are not even saving any space, as 1 oz. coins in a plastic tube use up less space in a vault, so a big gold bar in large plastic becomes even less useful.
The best and two most popular forms of gold are Gold Eagle 1 oz. coins, or generic gold 1 oz. bars. Again, my chart of my most popular forms of bullion bought and sold can be very useful for this discussion: http://jhmint.com/reports.html
If you ever visit the JH MINT in Grass Valley, ask to see our tray of fakes. I keep a tray to show how badly done most fakes really are. We have on display fool's gold, lead coins, gold electro plated coins, commemorative plated coins. They never get the weight and look just right, and most are not intended to be fakes. A gold plated commemorative coin filled with copper is about twice the size, and half the weight of a gold coin. (Because gold is dense and heavy, like tungsten.) It's extraordinarily easy to detect most fakes.
Finally, as proof that what I'm saying is true, that 10 oz. gold bars are not so popular: the reports of the fake ten oz. gold bars show they were sold to refiners. Well, that's because a refiner is most likely going to melt them down, like all the other useless forms of gold out there like used, old, dented, out of style gold jewelry or placer nuggets and gold teeth.
The other way I know the news reports are lying when they write, "ten oz. gold bars are popular" is the fact that no form of gold is popular because gold itself is still very unpopular and remains a rare and overlooked market, and remains undervalued. All the gold produced by the world every year, at 70 million oz., x $1700/oz. is $119 billion/year., which is tiny in the scale of world finance. Gold Eagle coins are only a $1.7 billion/year market in the USA given the mintage figures released by the US mint, and thus, the 10 oz. gold bar market is far smaller than that, perhaps less than 1/100th in size I'd estimate, and thus, perhaps be only about a $17 million annual market in the USA. If ten of these bars are now reported to be counterfeit, that's $170,000 worth. It's tiny, and wildly unpopular, not popular.
In conclusion, ten fake 10 oz. gold bars was a $170,000 scam. That means that almost no gold in the gold market is fake. Paper money is a scam worth hundreds of trillions, that's maybe closing in on a quadrillion, which is $1,000,000,000,000,000. That means that all of the paper money in the paper money market is fake.
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