Gyroscopic Investing

Any advice on how to not get ripped off when buying bullion coins (not so much on price but on authenticity and actual gold content)?

I second his curiosity.  I like the idea of owning them myself as opposed to using a non-vanguard fund... especially in the accumulation phase when I don't really have to sell it, but simply adjust what I buy more of.

You should read the Gold FAQ. The big takeaway is to use a well-known bullion dealer and you'll be OK. Don't buy anything off E-Bay or other like sites. Don't buy gold coins from China (except authentic Chinese Panda coins). Stick to American Eagles, Krugerrands and Canadian Maple Leafs to start. If you are doing a lot of coin buying you could consider buying a Fisch coin tester. But that's probably overkill for most people unless you are buying from many random sources (like coin shows):

http://www.fisch.co.za/home.htm

I agree with Craig.  What I've done is use digital calipers and a digital scale for verification.  As long as the width, diameter & weight are accurate, I'm comfortable.  I've done this test on every gold coin I've purchased--even though they were purchased from reputable dealers.  It just gave me peace of mind.  You don't want to be in a rebalancing event and find out your gold coins are actually made out of unobtanium...

I bought the Fisch in order to get piece of mind.  It wasn't necessary, but considering the amount of gold I will eventually I thought it was worth it. 

Now what would happen if I found a fake coin from a reputable dealer?  Who knows how they might handle it.  But I think the odds of that are very remote and if doing it again I'd probably skip the Fisch.  Stick to reputable dealers as craigr said and you'l be fine.

A reputable dealer doesn't want to get stuck with a bad coin. That means they eat the cost vs. risk ripping off a customer and having that bad reputation out there. So when in doubt, stick to dealers that have been around a long time. I list a couple in my Gold FAQ but any reputable coin shop is probably fine. Again I wouldn't buy on Craigslist, EBay, etc. Also any coin that is being sold below gold spot price is very suspicious.

craigr wrote: A reputable dealer doesn't want to get stuck with a bad coin. That means they eat the cost vs. risk ripping off a customer and having that bad reputation out there. So when in doubt, stick to dealers that have been around a long time. I list a couple in my Gold FAQ but any reputable coin shop is probably fine. Again I wouldn't buy on Craigslist, EBay, etc. Also any coin that is being sold below gold spot price is very suspicious.

I would urge all investors to keep the motto that Ronald Reagan made famous: trust, but verify.  This includes all purchases from reputable dealers.  Most reputable dealers are high-volume dealers, which means more than likely they are not testing every coin that is bought and sold. 

Think about a likely worst-case scenario: you purchase a tube of american eagles from a reputable dealer.  That's almost $30K at today's prices--a good deal of money on which to base trust.  You assume everything is kosher, and put those eagles away.  One year from now you rebalance and sell that tube.  If the new buyer finds that your coins aren't legit, what reasonable recourse do you have?  IMO, the only recourse an investor has is within several days after a purchase.  After that, it's a I-said, he-said issue.  Very dicey.  I always sweat a bit when making a new transaction.

As the price of gold moves up, there will be more incentive for people to do the wrong thing.  I know this is a very low-probability event, but it's worth considering.  Although it's not an identical comparison, lots of folks trusted Bernie Madoff without verifying.  He had a stellar reputation in the business for a long time.  Just sayin...

Good points. Not saying to not check your coins. Just that using a good dealer eliminates a lot of potential problems.

MeDebtFree wrote: Any advice on how to not get ripped off when buying bullion coins (not so much on price but on authenticity and actual gold content)?

In addition to the advice already given, I'll recommend another thing to do:  Visit your local coin dealer on a good weekend and have a long chat with her/him.  Pick up and feel each and every gold coin, so you can have a good idea of what real gold looks like and feels like.  Use a magnifier to look closely at the engravings on both sides of the coin, as well as the edges.  Listen to how they sound when they clink and clank against each other.  Don't forget to contrast and compare the St. Gaudens $20 gold coin (the last US gold coin of the 20th Century before the confiscation in the 1930s) with the US Gold Eagle $50 bullion coin--they look similar, but there are real differences.  Then do whatever it is you do when you want to memorize something, and memorize what the real coins look and sound like.  And when you buy gold coins, handle them periodically, to reinforce the memory. 

You can do this over a couple of weekends or even during your mid-day break; you might as well enjoy the process.  BTW, you can look at pictures on the internet, but it's not the same as doing it in person.

Beware that there are replica coins for sale by private mints that may superficially look like real gold coins.  By law, a replica coin is supposed to have the word "replica" stamped or engraved on it, but many such replicas are from China, and the word may be so tiny as to be invisible.  I've seen some coins online that do not have that word on the coin itself, but on a piece of paper included with the "coin."  Very dangerous, as paper can be lost and such coins can get mixed in with real gold coins, and inexperienced people--currently the majority of the population--will mistake them for the real thing.  Replica coins are smaller or larger than the real gold coins because of the non-precious metals they're made of that don't match gold in density.  They're made of cheap metal plated with a thin layer of 12K or 14 K gold, so they won't look or feel like the real thing.  That's where direct physical experience, and physical memory, come in handy.  They won't pass a Fisch test, either. 

Stay away from bars unless you are prepared for the hassle and cost of having them melted down and re-assayed before you take delivery or buy for allocated storage.  (Frankly, if you can afford to buy a bar, you can afford the melt/assay costs.) 

There is no Fisch tester for bars.  Even if you've been planning to get bars directly from HSBC or Moccata or take delivery on a futures contract from some other well-known bullion bank, I'd still recommend having any bar melted and assayed.  This isn't as weird a process as it sounds, as gold has been melted and remelted for thousands of years.  Most good artisan jewelers melt and test gold routinely to mix and make gold jewelry--they have facilities in the back of the shop.  (The bullion bank can advise you where to have the gold melted and assayed so the result can be certified for financial purposes.  Don't let them talk you out of doing it.)  The assay is simply a test of the components of the bar.  The assay result may show, for example, that your good bar is made of 0.999 gold, 0.0005 Silver, 0.0005 Copper--or if you've encountered a bad bar, it may show 0.100 gold, 0.800 Tungsten, 0.009 Copper, etc. 

There have been reports that some tungsten bars, thickly plated with gold and complete with serial numbers, have entered the legitimate (allocated/unallocated) gold storage system.  Tungsten has almost the same density as gold, and short of a melt/assay it would be impossible to determine using traditional methods (including x-rays) whether you have a gold-plated tungsten bar rather than a solid gold bar.  I have not heard of gold coins and small ingots--1 oz. or less--being counterfeited like this, as tungsten's characteristics make this very difficult to do technically for small pieces of metal.  But as the price of gold increases, criminal and technological innovation may combine to come up with a new fraud to go along with the higher price.

Second the above. Don't buy gold from China is also a good piece of advice:

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

Tungsten can be detected with ultrasonic measurements. This article discusses the tungsten scare stories that are floating around:

http://goldchat.blogspot.com/2010/03/fa ... story.html

Ultrasonic testers will do the job without having to damage a bar. I quote some techo stuff from KK&S Instruments:

The 1090 Flaw Detector allows you to look into the Bar for voids/defects as well as UT velocity which is determined the products elastic modulus i.e Tungsten Velocity is 5183-5460m/sec and Gold is 3,240m/sec. For example if you calibrate for Au then the testing Tungsten bar of the same thickness, the UT thickness would read approximately half the actual because of the speeding-up of the sound through the Tungsten.

Wonk wrote:

craigr wrote: A reputable dealer doesn't want to get stuck with a bad coin. That means they eat the cost vs. risk ripping off a customer and having that bad reputation out there. So when in doubt, stick to dealers that have been around a long time. I list a couple in my Gold FAQ but any reputable coin shop is probably fine. Again I wouldn't buy on Craigslist, EBay, etc. Also any coin that is being sold below gold spot price is very suspicious.

I would urge all investors to keep the motto that Ronald Reagan made famous: trust, but verify.  This includes all purchases from reputable dealers.  Most reputable dealers are high-volume dealers, which means more than likely they are not testing every coin that is bought and sold. 

Think about a likely worst-case scenario: you purchase a tube of american eagles from a reputable dealer.  That's almost $30K at today's prices--a good deal of money on which to base trust.  You assume everything is kosher, and put those eagles away.  One year from now you rebalance and sell that tube.  If the new buyer finds that your coins aren't legit, what reasonable recourse do you have?  IMO, the only recourse an investor has is within several days after a purchase.  After that, it's a I-said, he-said issue.  Very dicey.  I always sweat a bit when making a new transaction.

As the price of gold moves up, there will be more incentive for people to do the wrong thing.  I know this is a very low-probability event, but it's worth considering.  Although it's not an identical comparison, lots of folks trusted Bernie Madoff without verifying.  He had a stellar reputation in the business for a long time.  Just sayin...

Good points.  Now I again feel good about the Fisch.

Wonk wrote: I agree with Craig.  What I've done is use digital calipers and a digital scale for verification.  As long as the width, diameter & weight are accurate, I'm comfortable.  I've done this test on every gold coin I've purchased--even though they were purchased from reputable dealers.  It just gave me peace of mind.  You don't want to be in a rebalancing event and find out your gold coins are actually made out of unobtanium...

Could you please tell me where I can find the dimensions and weight for Krugerrands and Eagles?

Jerry

glock19 wrote:

Wonk wrote: I agree with Craig.  What I've done is use digital calipers and a digital scale for verification.  As long as the width, diameter & weight are accurate, I'm comfortable.  I've done this test on every gold coin I've purchased--even though they were purchased from reputable dealers.  It just gave me peace of mind.  You don't want to be in a rebalancing event and find out your gold coins are actually made out of unobtanium...

Could you please tell me where I can find the dimensions and weight for Krugerrands and Eagles?

Jerry

http://www.onlygold.com/TutorialPages/C ... ersion.htm

Has anyone bought gold from OnlyGold, the company in Craig's link above?
They have a 10-oz minimum, but their prices look good and they pay shipping.