Consumer Alert for Bullion Buyers

on 12 December 2014. Posted in News

I received the latest issue of Canadian Coin News the other day and my mouth dropped after I read the first article.  Titled “Chinese fakers up the ante with thick plating” the article outlined how a company based in China (should I be surprised?) that sells through Alibaba is advertising a line of gold plated tungsten based bullion products.  This company brags about the fact that their products come with 60 microns of gold plating which is thick enough to pass the acid test, x-ray test and scratch test.  We checked with Thermofisher, the company that makes the electronic gun that x-rays gold that most dealers use and were told that their gun goes to a depth of 10 microns and that is the best that can be done with current technology.  This would confirm the Chinese company’s claim that their product would pass the x-ray test.  They also advertise that their products correspond exactly to the originals’ weight, diameter and thickness specifications.

The products listed on their web page is extensive and include gold bars with the Royal Canadian Mint and APMEX logos, Canadian Maple Leafs, US gold Eagles and Austrian gold coins.  I showed the web page to our in-house photographer and he pointed out that the pictures are all photo shopped and tweeked in one way or another so it is difficult to say how good a quality the fakes are until I have one in hand.  However this past week a gold dealer put an alert out that he was offered a proof gold Eagle in a capsule that was very deceptive and could fool you if you we in a hurry or not paying attention.

The company is targeting three types of buyers on their website.  People who are attracted by the heavy gold plating, people who want to give the gift of gold but can’t afford the real thing and worst of all profiteers.  These are people who would buy these products with the sole intention of passing them off to unsuspecting dealers.  The Canadian News article states that the only reliable test to tell if your gold coin is really gold is to drill it and make sure the core is not dark which would indicate that it is or is not tungsten inside.  This creates another dilemma.  If you drill your coin and it is real you now have a coin that is considered damaged and would sell for a discount to the true gold value.

At RCNH we are still assessing to determine exactly how we would handle this situation.  For the retail buyer there are a couple of alternatives.  You could buy your bullion certified.  The downside is that if you wanted to put these bullion coins in your IRA that would not work since graded bullion coins are not allowed in retirement plans. The other negative is that if certified coins are not available and you wanted to get them certified it is going to cost in the area of an additional $30 per coin to send them to PCGS or NGC.  I did speak with NGC and they will holder a bullion coin as genuine only but there is a 100 coin minimum and that would qualify as a bulk submission and lower the cost to about $10 per coin.  The other alternative is to buy low grade $20 gold coins.  As a numismatist I can say definitively that it is much harder to counterfeit a regular issue coin than a bullion product since there is much more detail to replicate with accuracy on a coin versus a bullion bar or coin.  Currently the premiums for $20 coins over the intrinsic gold value are at some of the lowest levels in years and it may be worth a look if you are thinking about making a gold purchase.

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