Part 1: The Increasing Problem of Counterfeit Gold

All that glitters may not be gold for long. The recent surge in the spot price of the metal may have excited investors and gold bugs alike (although they are not mutually exclusive), but it has also brought out the counterfeiters en masse.

Caution regarding authenticity should now be in one’s mind when purchasing both gold coins and gold bars. At the heart of the problem is the metal composition of the most currently produced counterfeit gold coins. The traditional way of detecting fake gold coins is to weigh them. Cheap counterfeits have typically been made of metals with substantially different mass to gold. As a result, either the counterfeit coin’s dimensions, or weight will be inconsistent with genuine coins. Tungsten, with a similar weight to that of gold has been used for some time in high-quality counterfeits, particularly within the gold bar industry, however counterfeiters are now using tungsten in coins as well.   

As addressed in an Aug. 6 Wall Street Journal report, “The mix of metals has improved the look and feel of fake gold, while online marketplaces such as eBay and Alibaba have made it easier to sell these products worldwide.”   

In May, Alibaba was suspended from the International Anti-counterfeiting Coalition. According to a June 13 CNN Money news cast, “Chinese-manufactured fake products are just as good – if not better – than the real deal, according to Alibaba founder Jack Ma.” A number of the most well-known third party coin certification services have admitted counterfeits of their encapsulations also exist.   

The Professional Numismatists Guild President, Dana Samuelso has said, “These sales of counterfeit coins are potentially a multi-million dollar problem for the public”. Samuelson continued, “We conducted an informal inquiry of PNG members and PNG Accredited Precious Metals Dealers (APMD) about what they’re encountering now in the marketplace. They have seen everything from counterfeits of vintage rare coins to modern precious metal items. These include fakes of popular century-old U.S. Morgan and Peace design silver dollars to current gold and silver American Eagles, gold U.S. Buffalo coins, silver and gold Chinese Pandas, and Canadian silver and gold Maple Leaf coins. We’re also seeing spurious gold and silver ingots.”   

The Wall Street Journal article quotes the Arizona based Scottsdale Mint President Josh Phair as saying, “If counterfeits enter the mix to a greater degree, that could really erode confidence.” This would be particularly prescient in a scenario where gold prices increase substantially from current levels.   

Portraying an alternate view however, Numismatic Consumer Alliance spokesman John Albanese cautioned the WSJ, “They’re sounding the alarm bells, but I personally think it’s overstated.” That said however, it is at least apparent that one must consider that if counterfeit coins aren’t currently an enormous issue, if the gold price were to increase to multiples of its current level (on any timeframe), it most certainly would be.   

Overstated or not, mints and distributors have been making moves to defend their brands even before anyone whispers the word “fake.” In 2013, the Royal Canadian Mint began adding a micro-engraving security feature to its gold Maple Leaf coins. The Perth Mint in Western Australia has added microscopic images to its 1oz silver Kangaroo coins.   

Additionally, smartphone apps capable of scanning gold and silver coins or ingots, for instance through the use of a QR code present on the tamper-proof packaging, to help authenticate these products are being used by the Scottsdale Mint, among others. Some apps can test the acoustic characteristics of the coins by the sound the coins make when struck. As this technology develops, the less worry people should have about purchasing counterfeit gold coins.   

I have never had an experience purchasing a counterfeit coin. Living close enough to the Perth mint, I am able to purchase metals directly from the source, in person. Most likely however, based on simple population distributions, this is not possible for the majority of the people purchasing the precious metal in its physical form. Online purchases where the buyer is sight unseen until after payment provides counterfeiters a prime opportunity, particularly as many people may not know what genuine coins or bars looks like. In this case, they may not recognize the fakes for months or even years, in which case buyer protection time limits on services such as PayPal will have expired.   

Counterfeit gold bars in particular are extremely common on platforms such as EBay. In Part 2 of the article, I will show you a number of examples of current or recently closed listings on EBay which are likely to be counterfeit and provide advice on what to look for in these listings to avoid being fleeced.