Miles Franklin has been in business for 27 years – with an A+ Better
Business Bureau rating, and not a single registered complaint since
opened our doors in 1989. The company is still owned by the father and
son team that founded it, Andy and David Schectman; and our brokers, on
average, have been selling bullion since the early 1980s. For a variety
of reasons – from our sterling reputation; to competitive sale prices; the
industry’s best “buyback” prices (particularly for Miles Franklin customers);
an industry-leading storage program, featuring per ounce pricing; and of
course, this entirely FREE blog, we emphatically believe Precious
Metal dealers are decidedly not “commodities” – even if our primary
products are.
That said, whilst our “raison d’etre” is generating an honest profit,
educating consumers is self-evidently a labor of love. Between David
Schectman, who started the Miles Franklin Blog long before the
internet existed – and still writes for it today, in semi-retirement; to Andy
Schectman; myself; and until he recently left to join Jim Sinclair, Bill
Holter; all of us cherish the ability to disseminate truth in a world of
lies, propaganda, and misinformation. And nowhere more so than in the
highly opaque Precious Metals industry, where strong communicators are few
and far between. Which is why, I might add, Andy Schectman and I have
experienced strong attendance at our free, nationwide “Q&A Rap Sessions,”
such as those held this year in Denver, Minneapolis, Phoenix, and Ft.
Lauderdale. Which will most certainly be replicated at this Friday’s
event in Houston (email me at ahoffman@milesfranklin.com
if you’d like to attend); June 24th in Chicago; and thereafter.
Regarding today’s “special supplementary” article, we have for years
answered investor questions about the risks of bullion counterfeiting.
Which, until recently, were close to zero – particularly regarding smaller
denominated coins, as in one ounce or less. And of course, we’re only
talking about gold here; as silver, as yet, is too inexpensive to even dream
of profitably counterfeiting; whilst platinum is too scarce, with too narrow
a supply chain, to reliably source.
Until very recently, we had NEVER seen a counterfeit one ounce gold
coin. Although we have, from time to time, seen the “counterfeiting” of
bullion coins (nearly invariably, in China) – which didn’t try to pass
“gold-plated” coins off as pure gold; but instead, tried to make actual
bullion coins appear to be numismatics.
However, modern times have brought modern technologies – and with them,
modern fraud. Thus, atop our ongoing advice to avoid larger
denomination bars (10 ounce-plus) from non-government mints – as exemplified
by the 10 ounce bars discovered in 2012 to have been gold-plated tungsten –
we want to emphatically remind you of the risks of buying from unreliable
sources, that do not guarantee the authenticity of their products. And
since Miles Franklin is one of just 27 U.S. Mint primary dealers; working
with the largest, most reputable wholesalers in the world; of which, nearly
all of our business regards the sale of newly minted government product,; the
odds of “something going wrong” regarding the authenticity of your coins is
as close to zero as you can get.
To emphasize the point of what you need to understand when considering a
bullion coin purchase – from a counterfeiting standpoint – below are excerpts
from an excellent article from Sean Broderick, Resource Strategist of the
fine Oxford Club organization – with which, Miles Franklin has been proud to
be affiliated for many years. After that, I’ve reprinted a description
of what our principal distributor does to identify counterfeit coins.
Which, after reading it, will most certainly assure you that when dealing
with Miles Franklin, you can sleep well at night. First, Sean
Broderick’s article – titled “Investing in Gold? Heed this Urgent
Warning.”
I have an urgent warning for you…
DO NOT buy gold coins from eBay, Craigslist, or any vendor that DOES NOT
guarantee the authenticity of the coins. That’s because Chinese fakes
have flooded the market. So, that super deal you found on eBay? It may not be
so super after all.
“We’ve been seeing fake coins come from China for some time,” says a
numismatic expert at a leading bullion dealer. “It seems like many of these
counterfeit coins from China are sold to unscrupulous distributors through
sites like Alibaba.”
These crooks love to sell their fake coins on the internet. But it used to
be that the Chinese sold only fake “rare” gold coins. Made out of real gold,
they were copies of coins with numismatic value. Today, the Chinese are
going for volume. They are making “gold bullion” coins out of metals
including lead, zinc and – especially – tungsten. And there’s the
problem. Tungsten has very high density. It is very close to the
density of gold. Some of these Chinese fakes are extraordinarily
artistic, too. They are crafted with lasers to exactly replicate the look and
shape of the real thing. In the old days, coin dealers could easily
tell a bogus coin by its weight, its color and how it reflected light.
China’s new laser-crafted, tungsten-filled coins are very difficult to spot
from a distance. Especially if the resulting fake coin is plated in
gold.
“There are hundreds of thousands of these things,” Scott Schechter, vice
president of Numismatic Guaranty Corporation, said in press reports. “They’re
just everywhere.”
Factories in China are busy churning out thousands of fake American Silver
Eagles, Canadian Maple Leafs and U.S. Buffalo coins. They’re sold everywhere
from flea markets to eBay and Craigslist. In many cases, you’ll
likely be tipped off because the deal seems too good to be true. Or maybe the
price will be just under the price of a reputable dealer. You
could end up paying golden prices for a handful of tungsten.
How to Avoid Counterfeit Coins
We’ve seen tungsten used to fake out the gold market before. In September
2012, there were reports of a bunch of 10-ounce tungsten gold bars bought and
sold in New York’s jewelry district. So the Chinese have been at this
for quite some time. In fact, they’re quite brazen about it. One example is a
company called China Tungsten Online that hawks “gold-plated tungsten coins”
on its website. The web page says: “Our product is only for souvenir
and decoration purpose. Here we declare: Please do not use our gold-plated tungsten
alloy coin for any illegal purpose.” I’m sure that covers the legal
bases.
“Well,” you might say, “Sean’s a worry-wart. I’ll continue to buy gold
coins on eBay. I’ll just make sure I buy only from sellers with good
reputations.” Hey, it’s not as if eBay reputations can’t be pumped up
or faked outright. And if you get into a dispute with a China-based scam
artist on eBay, don’t be so sure that eBay will take your side.
The good news is you can beat counterfeiters. Even if you don’t
take any extraordinary steps, you can still…
- Know your bullion dealer. If someone hasn’t been
in the business for at least 10 years, find another dealer.
- Make sure the dealer has counterfeit-proofing
measurements in place. They should be able to assure you they never accidentally
bring fake bullion products into their inventories.
- Make sure your bullion dealer guarantees the
authenticity of every product they sell. If not, keep on cruising.
Modern Technology to the Rescue
(Fortunately, a new device) called a Precious Metals Verifier, or PMV,(is now
available). The PMV is made by Sigma Metalytics. It’s designed specifically
to check for counterfeits. How it works: The PMV uses the known
resistivity – or specific electrical resistance – of precious metals of
varying purities to test if a coin is genuine. The PMV can even test
most coins that are in album sleeves or plastic cases, making it a convenient
and non-destructive option. “We sell PMVs to our customers and
especially to other coin dealers,” Mr. Millman added. Word to the wise:
A PMV is not quite as expensive as a 1-ounce gold coin… but it’s still pretty
pricey. If you’re not in the business, you might want to leave the testing to
reputable dealers.
Please not that I bolded the sentence “In many cases, you’ll likely
be tipped off because the deal seems too good to be true. Or maybe the price
will be just under the price of a reputable dealer.”
Again, we cannot emphasize enough, that in a highly commoditized industry
(product, not service), anyone consistently selling below the cost of primary
dealers like Miles Franklin should be a major red flag, given that we can
source bullion as cheaply as anyone in the business. In other words,
you may well be “Tulving’d”;
“Bullion Direct’ed”; or Northwest Territorial Mint’ed.” Or in the
case of buying online, from unknown sources, you could easily become the
victim of a counterfeiting scam.
And now, for a bit of “bonus coverage” – which I assure you, you won’t
find anywhere else in the bullion industry – here is what our principal
distributor, who we have worked with for decades, sent me when I asked how
they counteract counterfeiting. Specifically, how they recently spotted
two counterfeit gold Kruggerands – which, as you can imagine, were not
sourced from the South African Mint, but the “secondary market.” It’s a
quick read, and well worth your while…
“We take pride in our ability to detect and turn back counterfeit gold
and silver coins and bars. We use the latest technology available to
accomplish this, including electrical resistivity and radiographic testing,
x-ray spectrometry, ultrasound, as well as well-trained eyes resulting from
decades of experience.
Our primary sources of bullion coins and bars are direct purchases from
the refiners and private and government mints that produce them. However, the
secondary market is always very active and we are active bidders in all types
of bullion products, so we inevitably wind up purchasing metal from
“secondary” sources. Because this market entails a break in the “official”
chain of custody, all products which we purchase in the secondary market are
required by company policy to undergo special intake quality control procedures.
Recently we purchased several dozen 1 ounce gold Krugerrands from a
dealer in another state. During our initial testing telltale anomalies were
detected in the composition of the coins, and so the entire batch was then
put through our most advanced level of testing.
One of the two coins above is a counterfeit. Can you spot it?
The coin on the right read appropriately on our Sigma Metalytics
resistivity tester, but the coin on the left failed this preliminary
test. Make note of the fact that the coin from the left is a more
“golden” color than the coin on the right.
Next, the offending coin was tested using x-ray spectrometry, which
provides a molecular readout of metals being scanned, up to about 10 microns
deep. Notice that the purity of the Krugerrand from the left is 97.49%.
This is far above the appropriate 91.67% purity of an actual Krugerrand.
Notice also that the readout says “Gold Plate Suspect”.
Additionally, when doing a “drop test”, where the coin is dropped on a
solid wooden surface, the counterfeit coin emitted a dull thud and a dull
sounding roll. A genuine Krugerrand, when drop tested, sounds with a very
high-pitched, clear ring. Now that we were assured of the counterfeit
nature of this Krugerrand, we decided to cut into it to see what it was
really made of:
By angling our x-ray into the cut, we were able to see that this coin
was actually composed of a planchet struck from Germanium, Nickel, Zinc and
Copper. A heavy 23k gold & copper plating was then added to the planchet.
It appears they were attempting to alloy the plating to approximate the
91.67% purity of a proper Krugerrand, but they failed to perfect this
technique for now. Even if they had managed to do so, the electrical
resistivity and “drop test” would not have been passed by this piece.
By all accounts this was an incredibly sophisticated counterfeit
Krugerrand. The thickness, diameter and weight were all 100% on spec. It
easily fooled the traditional “gold fisch” test kit, which measures these
attributes, and came in at an even 33.9 grams on the scale.
In total, there were 2 fake gold Krugerrands that we pulled out of 40
that were sold to us.
In the next image, the coin on the left is the counterfeit. You can see
that the detail in the beard and the hair is washed out. This is due to the
casting technique used by the counterfeiter. Although it was a very advanced
casting technique, it still shows the telltale lack of perfect detail when
compared to a genuine piece.
This fake coin was mostly gold, however. But, the purity was a couple
percent lower than it should have been. Why anyone would attempt a
counterfeiting operation like that is beyond me. It would take passing 100
fake coins off before a decent “take” could begin to be made.
Hopefully, this article opens your eyes, as to not only the inherent risks
of bullion investing, but just how easy such risks are to avoid, if only you
consider who you are dealing with. Remember, like anything in life –
and particularly, the investment of your hard earned savings – “you get what
you pay for!”
