Gyroscopic Investing

Now that gold is hitting new highs, there seems to be a greater incentive for someone to make fake gold coins using another metal as a filler, with only gold on the outside, and making it match the same size and density.

Is there anything we can do to ensure the gold coins we buy from shops or ebay is legit? 25% of a portfolio can be substantial, so if buying  several hundred dollars worth of testing equipment is necessary, it might be worthwhile.

I've heard of a tool called a Fisch tester ( http://www.fisch.co.za/home.htm ) but I haven't used it myself.

My gold FAQ has an entire section on this question:

https://web.archive.org/web/20160324133 ... ation-faq/

Only buy coins from well established dealers. Don't buy off E-Bay and for heaven's sake don't buy any gold out of Asia!

KevinW wrote: I've heard of a tool called a Fisch tester ( http://www.fisch.co.za/home.htm ) but I haven't used it myself.

They work well if you are buying a fair number of coins (or are in a hurry like at a coin dealer). For smaller amounts a set of calipers and a good digital scale will also do the same thing. All you need is a coin spec table that I link to in the FAQ. But if you don't want to mess with that the Fisch tester is hard to beat for simplicity and ease of use.

Craig,

Thanks for the link. $170 seems reasonable to ensure that tens of thousands of dollars of gold coins are real. Currently I am 100% in tax-sheltered accounts, but eventually my earnings will outgrow my ability to legally shelter money and I'll start shifting my gold into taxable using coins.

I can't tell from the pics if that tool only measures 1 ounce coins or if it also works for 1/10 ounce.

Craig, do you have one of the tools?

I have one, but haven't used it in a while. They are simple to use but I don't think they do 1/10th ounce coins. You'll want the scale and calipers for that. Each detector only does certain types of coins (like 1oz. Eagles/Krugerrands or Maple Leafs). But again if you stick with a well-known dealer the chances of you getting a fake are not very high. It is unlikely a fake is going to make it into their inventory.

Now if you're buying from Chairman Mao's Gold Shop on E-Bay out of Hong Kong that is another story.

How about this instead of the $170 fisch tool?

http://www.goldcoinbalance.com/

That cheaper tool seems legit. If the coin has the proper diameter and thickness, then the most it can weigh is gold, since gold is denser than everything but platinum and tungsten.

So if the gold coin tips the scale, that means it weighs more than "just less than the weight of 1 ounce of gold."

It can't possibly be made of lead because the same lead would require a bigger volume of coin than you determined it was.

The only other alternative if it's fake is that it's lighter than gold, because it was the correct volume. And this tool will know if its too light because it wont tip the little scale.

Seems genius and at $20, probably worth having.

It seems like the caliper/scale method would only work if one assumes the entire interior of the coin consists of a single metal. If the counterfeiter used an alloy having exactly the same density as gold, the caliper/scale method would fail to detect that.

For example, according to the list of elements on Wikipedia, here is the density of gold along with the two metals that appear to be the closest to it in terms of density:

• Tungsten: 19.25 g/cm^3
• Gold: 19.282 g/cm^3
• Platinum: 21.46 g/cm^3

So, for example, to produce exactly the same density as a pure gold coin, one would just need to create an alloy consisting of 98.55% tungsten and 1.45% platinum. Since the price of tungsten is virtually zero relative to platinum, the cost of making the alloy (excluding overhead and labor) would be dominated by its tiny platinum content.

For a platinum spot price of ~$1875/oz., the alloy described above would cost only ~$27/oz. in terms of its metal content! And a gold-plated counterfeit coin made from this alloy would not be detected by the caliper/scale method.

Perhaps most gold coin counterfeiters are not sophisticated enough to think of blending tungsten and platinum together into an alloy, but I would think at least a few of them must be.

If that alloy has not yet been found in any counterfeits, perhaps it is because either (a) the alloy is impractical to produce for some reason, or (b) it is indeed being produced and used in counterfeits, but all of those counterfeits have gone undetected so far due to their exact match of gold's density.

Kind of disturbing to ponder, no?

I have heard that tungsten is a popular filler for gold bars.

However, something about its properties makes it harder to fake an intricate gold coin. Perhaps it is too brittle. One more reason to stick with American Eagle coins...

melveyr wrote: I have heard that tungsten is a popular filler for gold bars.

However, something about its properties makes it harder to fake an intricate gold coin. Perhaps it is too brittle. One more reason to stick with American Eagle coins...

Well, I think the biggest reason to stick with American Eagle coins over gold bars, is that the gold bars are 400 ounces and over $700k worth of gold at current market prices. 

TripleB wrote: How about this instead of the $170 fisch tool?

http://www.goldcoinbalance.com/

I would sure like to hear from anyone who has tried this tool.  Considerably less then the Fisch tool and somewhat less than a cheap pair of digital scales.  However, since I already have a pair of calipers I'm considering a digital scale from Harbor Freight.  I would think the accuracy of these scales would be sufficient.

melveyr wrote: I have heard that tungsten is a popular filler for gold bars.

However, something about its properties makes it harder to fake an intricate gold coin. Perhaps it is too brittle. One more reason to stick with American Eagle coins...

Where did you get that piece of information regarding the difficulty of using gold-plated tungsten or a tungsten alloy to fake a gold coin? Can you cite your source?

TripleB wrote: How about this instead of the $170 fisch tool?

http://www.goldcoinbalance.com/

That is very cool. Looks like a simplified version of the Fisch tool. I ordered one and will post a review. Thanks for the link.

Tungsten has been used in fake coins and bars. But it can be detected with ultrasonic tools as it carries the waves different than gold. Here is a place in China that will make tungsten core gold for you:

http://www.tungsten-alloy.com/en/alloy11.htm

Lesson: Don't order gold from Asia or off of places like E-Bay. Stick with Eagles, Krugerrands or Maple Leafs and not collectible coins. Order from reputable dealers.

Tortoise wrote:

melveyr wrote: I have heard that tungsten is a popular filler for gold bars.

However, something about its properties makes it harder to fake an intricate gold coin. Perhaps it is too brittle. One more reason to stick with American Eagle coins...

Where did you get that piece of information regarding the difficulty of using gold-plated tungsten or a tungsten alloy to fake a gold coin? Can you cite your source?

I don't remember where I originally read this. However, the www.goldcoinbalance.com website states that "There are only two metals that come close to gold in weight. Platinum, which costs more than gold, and Tungsten, which is so brittle it can't be stamped into a coin."

However, the Chinese site that craigr posted is making me think that it is possible.

EDIT: Although I am not finding American Eagles or Kruggerands on their site...

It is entirely possible to have a gold bar with tungsten powder inside it. It has already happened in Asia and many were seized a couple years back. I will have to dig up the articles on it if I can locate them.

Gold outside but tungsten inside is entirely possible. It would pass an acid assay test and weight, but would probably fail an ultrasound analysis:

http://www.lbma.org.uk/assets/lbmaars20 ... ntrol1.pdf

As gold goes up in price these things become more of an issue. This is also a reason why if you take gold bars for delivery from a bank they will charge you an assay fee to re-deposit it with the bank. Once the bars leave the bank's control they are no longer considered Good Delivery Bars (http://en.wikipedia.org/wiki/Good_Delivery) and need to be re-assessed for purity.

As for coins, I've not heard of this problem yet. But again as the market for gold coins goes up it becomes attractive for fraud.

Thanks for the info, guys. It appears that tungsten may be too brittle to strike as a coin, but if encased in an outer layer of softer metal (like gold itself), could easily be struck as a coin.

The existence of ultrasound equipment--and perhaps other sophisticated techniques--does not necessarily ease my concerns regarding counterfeit gold coins. Presumably it makes economic sense to use sophisticated testing equipment on large gold bars since their gold content is so very large, but who has the resources to run an individual ultrasound test on each and every gold coin that passes through their hands?

I doubt even the most reputable bullion dealers can afford to perform an ultrasound test on every gold coin, so in that sense, it would seem that one thing their pristine reputation does not protect them or their customers from is fake tungsten-core coins.

It would be amusing if a tungsten-core coin, despite its density similarity to gold, might possibly have a fatal flaw: an obviously different "clink" sound than real gold when struck against other metal objects. (If ultrasound tests can tell tungsten and gold apart, then maybe a test in the audible range could, too?) If so, then maybe that is why we haven't heard very much about tungsten-core counterfeit coins being a widespread problem.

I agree that buying only from reputable dealers and performing a quick size/weight test is an excellent way to filter out the vast majority of fake coins, but all it takes is one undetected counterfeit to potentially screw you out of $1850--perhaps not a catastrophic loss, but certainly not a pleasant experience, either. All I'm saying is that perhaps the possibility of tungsten-core fakes is something that most bullion coin investors would be wise not to ignore completely unless someone devises a cheap, portable, quick test to detect them.

Maple Leafs et al. are pure gold, while American Eagles, Krugerrands, Double Eagles, etc. are alloyed gold.

It has been too long since chemistry, but while pure tungsten might have similar properties to pure gold, would an alloy of tungsten be easily matched to alloyed gold coins?

It is somewhat ironic that gold and platinum are fairly close in price now, with gold for a time exceeding the price of platinum.

WildAboutHarry wrote: Maple Leafs et al. are pure gold, while American Eagles, Krugerrands, Double Eagles, etc. are alloyed gold.

It has been too long since chemistry, but while pure tungsten might have similar properties to pure gold, would an alloy of tungsten be easily matched to alloyed gold coins?

Yes, I think it would. All one would need to do is adjust the relative proportions of the metals in the alloy to achieve the desired density. And instead of plating the core with pure gold, one would simply need to plate it with the alloy of gold, copper, etc. that is in the real coin.

The Financial Times had articles in December 2010 about this.

China gold boom sparks wave of counterfeits:

http://www.ft.com/cms/s/0/67dc062c-fe45 ... z1VdU2ymna

and

HK gold market hit by sophisticated scam:

http://www.ft.com/intl/cms/s/0/f7b05cf2 ... z1VdU2ymna

I wonder if a "ring test" might be useful for detecting coin fakes?

Canadian quarters minted in 1967 are either 80% silver or 50% silver, and one way to determine the difference (that seems to work very well) is to record the sounds of a dropped coin and examine the peaks on an audio frequency histogram.

See the video:

http://www.youtube.com/watch?v=qZdxf655fe4

All you need are some free software and a microphone.

TripleB wrote:

melveyr wrote: I have heard that tungsten is a popular filler for gold bars.

However, something about its properties makes it harder to fake an intricate gold coin. Perhaps it is too brittle. One more reason to stick with American Eagle coins...

Well, I think the biggest reason to stick with American Eagle coins over gold bars, is that the gold bars are 400 ounces and over $700k worth of gold at current market prices. 

Are you saying there is increased safety in Eagles over other popular gold coins?  Or are you using the term Eagles generic for all common gold coins?

G19:

I believe he was using Eagle as a generic term.

As far as platinum in counterfeit coins, I would find it humorous if gold goes up versus the price of platinum by a large margin, and more platinum counterfeits are made, and then when gold drops below platinum, the counterfeiters run out trying to find their fake coins that are now worth more than they are selling for (at the spot price of gold).

Tortoise wrote:Yes, I think it would. All one would need to do is adjust the relative proportions of the metals in the alloy to achieve the desired density. And instead of plating the core with pure gold, one would simply need to plate it with the alloy of gold, copper, etc. that is in the real coin.

I would think that once you throw in other metals with Tungsten to match the density of alloyed gold you would likely change the physical dimensions of the resulting product versus the alloyed gold.  So while you might end up with the same weight that would throw off the thickness or diameter.  Get the diameter and thickness right and the weight will be off, etc.

Any metallurgists in the crowd?