Con men have been using metals such as tungsten to exploit unwary gold investors with counterfeits and scams, a high-ranking official in the battle against such frauds said.
Gold fraud has been rising, as investors who have lost money on shares and currency trades turn to gold as a haven, Peter Lowe, the director of the International Chamber of Commerce’s counterfeiting intelligence bureau (CIB), noted.
Counterfeiters have tended to concentrate on bars of one kg or larger, a CIB investigator said.
These are poured, and can be easily adulterated or even hollowed out and filled with some other, cheaper metal.
Tungsten is the metal of choice for those wanting to imitate gold.
“Put some gold plating on tungsten and it will fool all the cheap, non-invasive tests, such as specific gravity, surface conductivity, scratch, and touch stone,” the CIB said.
Tungsten has a density nearly identical to gold, and when mixed with lead has a density nearly identical to pure silver. This renders the typical density calculation to verify the purity of bullion all but worthless.
Indeed, a conclusive result is only possible after drilling into the bar, taking a core sample and submitting it to more sophisticated verification techniques such as fire assay, optical emissions spectroscopy, or X-ray fluorescence.
This takes time, trouble, and expense, and counterfeiters know that to fully assay every large gold bar every time it changes hands will create bottlenecks for the gold market.
“Last summer, several counterfeit gold bars were found in the vault of a bank in Germany; the bank was unwilling or unable to say how they got there,” Lowe noted.
“More recently we have seen several gold-related trade scams, and in November 200 oz of fake gold was discovered in Hong Kong.”
Regarding the Hong Kong find, Haywood Cheung, president of the Chinese Gold & Silver Exchange Society, told Hong Kong media that “the recent find may be part of a much larger counterfeit metals operation”, and suggested that ten times this amount may already have reached the retail market.
Counterfeiters used a pure gold coating to mask an alloy that has similar properties to real gold, he said.
This metal included 51% of the bullion mixed with several other metals, and allegedly could only have been produced by someone with a high level of knowledge on metallurgical engineering.
Rumours of the existence of fake gold first surfaced in 2009, suggesting thousands of tungsten-filled 400 ounce “gold” bars were circulating throughout the world.
Of course, gold fraud is not just about counterfeiting: there also have been many trade frauds in recent months, varying considerably in scale and audacity.
Several of these have involved semi-purified gold doré bars from various countries in Africa offered for sale in large quantities at a fixed price well below world prices, CIB officials told MB.
The buyer is usually shown the genuine item and allowed to have it assayed; once the money is paid, however, what is delivered are bars of gold mixed with copper and zinc – or nothing at all.
Another popular ruse has involved fraudsters offering huge quantities of gold – thousands of tonnes – to the first buyer to come up with the money.
These are basic document frauds that exploit greed and could be applied to any metal or other commodity; their purpose is to extract an advance fee for goods that do not exist, and will never be delivered.
