We've maintained an affiliation with our friends at Hard Assets Alliance since 2012 and I hope they are always on your list of bullion dealers when making a purchase. They provide a fantastic service and you'll likely find this new post from Olivier Garret, the Founder and CEO of HAA, to be extremely helpful and interesting.
How to Spot Fake Gold and Avoid Fraud
By Olivier Garret, Founder and CEO of Hard Assets Alliance
Counterfeit products exist in almost all industries, and precious metals are no exception. However, there are many safeguards to protect yourself from buying fake gold.
The best way to ensure the authenticity of gold products is buying gold bars and coins strictly from LBMA (the London Bullion Market) approved dealers, mints, and refineries. This way, their authenticity is guaranteed.
LBMA is an international organization that sets standards for precious metals trading all around the world. They have over 150 members from 30 countries, among which are the biggest banks and financial institutions.
As long as your bullion stays in the custody of LBMA-approved vendors and vaults, there is no question about the authenticity of your metals. Dealers can bid for your coins or bars sight unseen because they know that the chain of custody is unbroken.
This is the reason all gold bullion at the Hard Assets Alliance comes from LBMA-approved mints and refineries. This is also the reason why we encourage our customers to buy precious metals for storage in one of our LBMA-approved international gold vaults.
It is much safer than storing at home or in a bank vault, and your bullion is available for delivery at all times. Even better, if you need to sell it, you can do it within a few clicks on your computer.
If you decide to take coins into your own custody (let’s say at home), dealers will have to inspect them before purchasing them. Reputable dealers use a number of tests to ensure the bullion they purchase is not counterfeit.
That should not be a real issue other than you will only get prices from dealers that have had a chance to inspect the coins.
In general, the risk of buying fake gold bars or coins is minimal as long as you stick to well-known sovereign coins like Eagles or Maple Leafs and buy from reputable LBMA-approved dealers.
The same is true if you buy sealed bars from LBMA-listed refineries. If you follow this advice, you should not really worry about counterfeit gold products.
How to spot fake gold when buying from local dealers
If you’d like to buy from a local dealer, despite the risks associated with taking possession of gold, make sure that you check the dealer’s reputation or get recommendations. In addition, I suggest that you learn the basics of how to identify fake gold.
It’s highly unlikely that a trustworthy dealer would offer you a counterfeit product, but knowing how to inspect gold bars or coins won’t hurt.
So here are a few tips.
Weight
Bring a digital scale to a local shop where you would like to buy gold. If you buy the most popular 24-karat, one-ounce sovereign coins, they should feel dense and heavy—and weigh exactly one troy ounce.
There are coins like the American Gold Eagle and the Gold Krugerrand that are made of 22-karat gold (.9167 fine) and weigh more than one troy ounce (they contain one ounce of pure gold with some alloys to increase strength.
Remember that precious metals are weighed in troy ounces. (A troy ounce is 31.1 grams).
If the coin is lighter or heavier than its actual weight, it’s a red flag.
Diameter and Thickness
This piece of advice is more suited to government-minted bullion coins (the only kind of coins you should consider), as they have standard dimensions.
Before buying coins, look up their dimensions on an official mint site. If the coin is too large or too thick, it’s almost certain the coin is a fake gold product.
Usually, fake gold coins are somewhat larger or thicker, so they are heavier and less detectable as fakes.
So always bring a set of calipers to a local shop for measuring.
Price
Trustworthy gold bullion dealers will sell gold bullion at 1.5% to 10% (or more) over the gold spot price (small fractional coins can have even larger mark-ups). This accounts for the spot price, refining and minting premium, and transportation costs, plus dealer overhead and profit.
If the dealer sells you gold at or below spot, they either have hidden fees to make up for losses or are selling fake gold.
A quick list of red flags:
Too light
Too large
Grainy or mottled appearance
Imperfect imprint or lettering
A seam along the rim
Magnetic (real gold will not stick to a magnet)
Sold under spot price
And once again, the best way to protect yourself from counterfeit coins is working with a reputable LBMA-approved bullion dealer.
I hope this helps you make the right decision and invest in precious metals safely.
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