The latest story regarding the problem with fake gold bars was released yesterday. A gold bar in the U.K. was discovered to be filled with an element other than gold...
According to Reuters, a 1kg gold bar had been drilled and drained of the majority of it's actual pure gold content. Instead, the drillers replaced the gold with tungsten, and was discovered because the bar was two grams lighter than it should have been.
If you take a look at this picture, you will see that tungsten rods had been inserted into the empty holes (where the gold had been extracted from):
*Image courtesy of GoldSeek.
Tungsten is a clever metal choice for this particular use as it possesses a similar density to gold.
This particular story sheds light on a disturbing phenomenon in today's gold-hoarding economy...
How many of these impostors have been distributed into circulation?
Chances are, the average gold-owner will be realistically able to physically test each of his/her individual gold bars to confirm its legitimacy and authenticity.
Hypothetically, those gold owners may be in for a shocking surprise if they ever wanted to cash in their gold, expecting a fortune, only to find that the actual worth of their holdings may be slashed enough if they have fake gold bars in their collection.
If there are 1.3 million salted 400 oz bars in existence, and each one is 75% tungsten, then that makes 390 million ounces of gold which in truth isn’t there. At $1,660 per ounce, that’s over $600 billion which people think they own but don’t. To put that number in context, it’s roughly half the total quantity of subprime mortgages which had been issued at the height of the housing bubble.
This problem isn't exclusive to the U.K either. Ron Paul has repeatedly questioned the authenticity of the gold bars at Fort Knox while questioning if US gold reserves gold bars are 100% pure.
This dilemma also contributes to the supply-demand curve issues. If there are may fake gold bars in the bullion market, that means the actual supply of “real” gold is less than experts have assumed.
Tungsten still has quite a bit of value to it, at it is also a rare metal, but gold-owners expect to get what they pay for, and rightfully so.
In the meantime, all of you gold-buyers should be extra cautious and as diligent as possible with your purchases. Do you best to ensure you are working with the most trusted gold experts and dealers. These risks are real for anyone invested in physical-gold.
This video instructs how to detect tungsten in a fake gold bar via an ultrasound that can detect voids and contamination within the bars:
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