Investing
With gold recently breaking its previous all-time highs and pushing through the $2,000 barrier, investor interest in the yellow metal has never been greater. But many investors in gold today are new to precious metals and are afraid of getting ripped off. That’s particularly the case for those with retirement assets that they want to roll over into a gold IRA.
If you’re looking to roll over $50,000 to $100,000 or more of retirement assets, you want to make sure that you’re buying real gold and not counterfeit gold. And if you don’t know how to tell if gold is real or not, you may feel uneasy about spending so much money on an asset whose authenticity you are unable to verify.
There are occasional stories of counterfeit gold coins and bars circulating the internet, so many new gold investors may feel that they don’t have the expertise needed to determine if the gold they’re buying is genuine. But that’s not the case, because all it takes is a little knowledge for investors to learn how to determine whether their gold is genuine, and how to minimize their risk of buying counterfeit gold.
The physical properties of gold are one of the reasons it has served as money for millennia. Real gold is:
Unlike silver, copper, or zinc, gold does not tarnish. And once it is alloyed, it is relatively hard-wearing, which is why so many gold coins that are centuries old are still in such good condition.
Most importantly, gold is dense. It is the seventh-densest metal in the world, with a density of 19.3 grams per cubic centimeter. If you’re familiar with lead and know how dense a piece of lead feels, imagine that same piece weighing 70% more and you’ll get an idea for how dense gold is. The only heavier metals are some in the platinum group such as platinum, iridium, and osmium, or radioactive metals such as plutonium and neptunium. And the only metals with a similar density to gold are tungsten and uranium.
Many of the metals with densities similar to or higher than gold have only been discovered in the last 200-300 years, and their rarity makes it difficult to use them to produce fake gold. Many of them also have higher melting points than gold, making it more difficult to use them to produce fake gold. For instance, tungsten, which has featured in recent stories about fake gold, has a melting point nearly 4,000 degrees higher than gold, which means that relatively few people have the ability to create fakes from tungsten.
For the average investor worried about counterfeits, cheap copies made from lead, silver, or even steel have been some of the primary coins to be concerned about. But if you’re worried about how to tell if gold is real, counterfeits made from those metals are relatively easy to spot.
It’s important to distinguish between the different types of counterfeit gold, as each type of counterfeit gold targets different types of investors or gold users. Generally speaking, counterfeit gold can be broken up into four different categories.
Good Delivery bars are those that satisfy certain physical requirements specified by the London Bullion Market Association (LBMA) and that are held in warehouses approved by the LBMA. Gold bars have to meet a minimum fineness of .995 (99.5% gold) and must weigh between 350 and 430 troy ounces. Bars that don’t comply with these requirements, that are similar but not fully compliant, or that leave the Good Delivery system are termed Non-Good Delivery.
The purpose of the Good Delivery system is to ensure that there is both a guarantee of purity and a recorded chain of custody. This minimizes the ability of bad actors to pass counterfeit gold bars into the world gold trade.
Those involved in the gold trade want to minimize the amount of work that has to be done to determine if gold is real. Since the price per ounce of a Good Delivery bar is the spot price quoted whenever you look up the gold price, Good Delivery bars play a very important role in the gold market, and their authenticity needs to be unquestioned.
Counterfeit investment bars are gold bars more commonly in demand from retail investors. These can range from one gram in weight all the way up to one kilogram. Many of these bars are produced by prominent refiners such as PAMP Suisse or Valcambi. They’re often stamped with a unique serial number, and smaller bars sometimes come in plastic packaging with serial numbers or holographic certificates of authenticity.
Because these bars don’t follow the same chain of custody as Good Delivery Bars, they’re a more tempting target for unscrupulous counterfeiters. That’s why it’s important when buying these bars to deal with sellers who have close direct links with refiners. They know how to tell if this gold is real or not, and can help sniff out fakes.
Counterfeit collectible coins won’t matter much to gold IRA investors, as collectibles aren’t eligible for investment through an IRA. But to coin collectors, these counterfeit coins are a big deal.
In many cases, counterfeit collectible coins may actually be made of real gold, with the proper metal content. But because they’re intended to fake a collectible year, mint mark, or design of coin, it’s a cost the counterfeiter is willing to risk. Using $2,000 worth of gold to mint a coin that can sell for $10,000 or more on the collector market can provide counterfeiters with a high return on their investment.
Investment-grade coins are often referred to as bullion coins. They are coins whose primary value derives from their metal content, not their rarity or collector interest. Counterfeit versions of these coins are not going to be made out of gold, or if they have any gold it will be a significantly smaller portion than the real coins they’re trying to copy.
Very often you might find a counterfeit coin made of lead or silver with a gold plating, or even a thicker layer of gold. Here too, spending $50 to $100 on metal to produce a coin that might retail for $2,500 offers counterfeiters a great return, while defrauding trusting investors.
China is alleged to be one of the world’s top sources of counterfeit coins. Both collectors and investors alike bemoan the fact that so many counterfeit coins come from China. Stories abound of markets in China filled with counterfeit coins.
While some of those coins may be intended as curiosities to sell to tourists or those who just want to brag that they own a gold coin, the sophistication with which they are produced can sometimes fool even experienced purchasers. And with the ability to purchase those coins and import them easily into the United States, there is no telling how many counterfeit coins have made it to our shores.
Certain counterfeits are easily recognized. Since the United States government requires copies of coins to have “Copy” prominently placed on them, some unscrupulous sellers try to remove that mark, something that is easily noticed when looking at the coin. But other fakes are of better quality, and fraudsters may attempt to sell them on online marketplaces or through online message boards.
There are numerous ways of how to tell if gold is real, both through destructive and non-destructive means. These include:
Every gold coin minted is minted with certain specified dimensions and weights. Knowing the diameter, weight, and thickness of these coins can help you determine whether a gold coin is genuine or not.
If a coin has the right diameter and weight, but is twice as thick, then it’s not made of gold. Rather, it’s likely made of lead, silver, or some less dense metal. If a coin has the right diameter and thickness but weighs too little, it again is not gold, but some less dense metal.
A small digital scale and a ruler or calipers can help you weigh and measure your gold coins to help you make sure they’re genuine.
Another way to test if gold is real is by conducting a magnet test. Gold is not magnetic, and no gold coin will ever contain iron or ferrous alloys. So, if your “gold” coin is attracted to a magnet, it’s not really gold. This is important when it comes to alleged fakes made from tungsten, as some tungsten alloys contain small amounts of iron and are mildly magnetic. If you have a gold coin that has the right diameter, thickness, and weight but is attracted to a magnet, it’s likely a fake.
If you let a gold coin fall on a table and then let a base metal coin such as a quarter or half dollar fall to the table, you’ll be able to tell instantly that there’s a difference in the sound between them. Precious metal coins have a pleasant and long-lasting ring to them, while the sound from base metal coins is more of a dull thud.
Acid testing of gold is often done in an inconspicuous place on a piece of jewelry, or using small pieces or flakes removed from a coin. The two main types of acid used are nitric acid and aquia regia, which is a mixture of nitric acid and hydrochloric acid.
Gold will not dissolve or react when exposed to nitric acid, while other metals will react and create salts and gases. Aquia regia, on the other hand, will dissolve gold.
Because these acids are incredibly strong and dangerous to work with, they’re not recommended for individuals to use. They’re more the purview of jewelers and others who work with precious metals.
Cutting or clipping coins can be one way to determine whether they’re made of real gold. Since tungsten is one of the hardest metals there is, you won’t be able to clip or cut a gold-plated tungsten coin. The downside to cutting or clipping, of course, is that you damage or destroy the coin, negating its purpose as an investment. This is not a method that investors should use. Rather, leave it to professionals.
Melting is another test that can determine whether a coin is gold or not. Since tungsten and other heavy metals melt at higher temperatures than gold, a gold-plated tungsten coin or bar wouldn’t melt in a furnace hot enough to melt gold. This obviously is another test that should be left to professionals, and only makes sense to do if you’re melting down existing gold to turn it into new bars or ingots.
Two recent methods to test if gold is real in a non-destructive manner are X-ray fluorescence (XRF) and ultrasonic testing. These can be done with handheld scanners and can determine not just the authenticity of gold but even its gold content within seconds. Due to the cost of these devices, however, these are methods used mostly by refiners, custodians, or large gold wholesalers.
As with purchasing any other asset, figuring out how to tell if gold is real doesn’t have to be difficult. You don’t have to resort to complicated testing of your gold to ensure that it’s real. It just requires some common sense and adherence to basic principles common to every purchase. Remember, with hundreds of millions, if not billions, of gold coins produced over the years and now in investor hands, the odds of purchasing a counterfeit coin are slim by keeping a few key things in mind:
You may think you’ve found a great deal on gold coins, or maybe you’ve found someone offering gold coins for less than the spot price of gold. What a great deal! Or is it?
If the price seems too good to be true, it could be a scam. Rather than waste your time trying to find out how to tell if the gold is real, it’s better just to walk away rather than fall victim to a potential fraud.
With gold available for sale all over the internet, it can be tempting to look for the best deal possible. Sometimes that means heading to online auction sites, where gold coins can be found in abundance.
But purchasing from those online sites, you’re at the mercy of sellers and their photos and descriptions. How do you tell if that gold is real? What if the person you’re buying from is reselling counterfeit coins from China? And what do you do if you end up buying a counterfeit coin?
At least with some online marketplaces you stand a chance of being able to file a complaint and get your money back. But what happens if you buy gold coins locally, through Craigslist ads, at estate sales, or from coin shops? Then you may very well be out the money you’ve spent.
It’s important to work with vendors who have established relationships with the mints that provide the investment market with their coins. At Goldco, we have agreements with mints around the world to purchase their coins directly, passing on to you coins that are guaranteed to be authentic products. And the custodians we work with can ensure that the gold coins you purchase for investment aren’t mixed with other coins, so that the coins you purchase will always remain yours.
If you’re looking to invest tens of thousands of dollars of your retirement savings in a gold IRA, you’ll want to make sure that the coins you’re getting are authentic. And even if you don’t know for certain how to tell if gold is real, choosing a partner who can authenticate gold for you can take some of the pressure off your shoulders.
If you want to learn more about investing in gold, or more about Goldco’s coin offerings from various mints around the world, contact the experts at Goldco today. They have helped thousands of investors just like you benefit from investing in gold. Make sure that you’re investing in authentic gold coins by giving Goldco a call and find out how you can safeguard your assets with an investment in gold.
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