Gold and Silver: Counterfeit Versus Counter-Fiat
After having previously been found outside of the United States, tungsten filled gold bars have now apparently been making the rounds in Manhattan. Tungsten is a relatively cheap and readily available metal compared to precious gold.
Furthermore, it seems that such counterfeit bars can fool even experts and reputable dealers due to the very close density of metallic tungsten relative to gold. Specifically, tungsten has a density of 19.25 grams per cubic centimeter, while gold has a density of 19.3 grams per cubic centimeter.
The fake bars are often created from hollowed out gold bars so that the serial numbers and golden exterior remain intact, while the precious gold filling can then be resold or reused after it is replaced with much cheaper tungsten.
Bar Counterfeit Reports Worry Gold Investors
Once again, the main effect of such counterfeit gold bar reports seems to be aimed at tarnishing the image of precious metals investing. Nevertheless, the discovery of yet another batch of gold coated tungsten bars seeping into the global gold bar supply is indeed worrisome for investors who may not have the sophistication required to distinguish a fake gold bar filled with tungsten from a genuine one.
Furthermore, such reports also tend to confuse and scare away a wary investor seeking some protection from the actions of an increasingly clear U.S. central bank policy to dilute the value of the U.S. Dollar in the name of fighting unemployment and stimulating economic growth.
Interestingly, at least some of these counterfeit gold bars were rumored to have been created as Fort Knox dupes during the Clinton Administration, and another batch of fake bars was reportedly uncovered in Hong Kong in October of 2009.
Of course, the ultimate counterfeiting has been the replacement of hard currencies like the precious metals with fiat paper money. Every day, growing amounts of the un-backed legal tender are created, making inflation an ongoing reality.
This state of affairs slowly but surely drains wealth from people as a result of the declining purchasing power of paper money, which is the ultimate unspoken tax. This risk is faced by all paper currency holders, whether they know it or not.
Investing in Bars Versus Coins
The investment debate over whether to purchase precious metals bars or coins is almost as old as the confiscation issue. Although it is quite costly and requires considerable sophistication to fake either precious metal bars or coins, the recent counterfeit reports indicate once again that bars are considerably easier to fake than government minted coins.
Furthermore, while gold investors may be justifiably concerned about the tungsten filled bar risk, fortunately for silver investors, the price of silver is not yet high enough to justify this sort of especially challenging counterfeiting.
Detecting fake bars can be done with ultrasound methods, which may be the easiest and most accurate way to discover counterfeit bullion. Also, purchasing precious metal bars only from a trustworthy dealer that you know will very likely filter out the fakes. When it comes to coins, the sound of an authentic coin to the trained ear is unmistakable.
The Effects of Counterfeit Reports
In the end, the release of this counterfeiting story will probably serve to prod more people away from actual metal investing and into assets that must continue to be devalued away at a higher and higher rate going forward. Beware of falling into this psychological trap.
If any impact is noted in the precious metals markets, premiums will likely rise on coins compared to bars. This could make the old, 90 percent, previously circulated coins seem more compelling as investments.
Nevertheless, any such higher premiums seen could easily be blunted by prudent dollar cost averaging and by employing a long term investment strategy for such coin purchases.
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