Fake Gold – Silver Explosion – End Of Bull Market by Egon von Greyerz,
Gold Switzerland | March 24, 2018
In the US, fake gold is
now a growing problem that is not being tackled. Congressman
Alex Mooney (not Money!) has just written to the US Mint
of the growing problem of high-quality counterfeits. He
also wrote a letter to the Mint in November 2017 but the
Mint responded that the problem was not significant. But
the US Secret Service has since briefed the office of Congressman
Mooney about the extent of the problem and the lack of supportive
actions of other agencies. There we have it – a complacent
Mint on the one hand and a Secret Service which is involved
in fake gold on the other hand. So this is clearly a major
problem.
CHINESE GOLD “FACTORIES”
Counterfeit gold coins have been around
since the coinage of gold first started in the Greek city
of Lydia around 600 BC. Fake gold bars and coins are ubiquitous
and many owners of gold are not aware that they have fake
gold. I realised the widespread presence of fake gold when
I was interviewed in Sydney by an Australian television
news team a few years ago. This team had just visited a
“gold factory” in China. They had covertly filmed the manufacturing
of fake bars and coins. They told me that they bought $500,000
of fake gold for $500. These were gold bars and coins with
well known brands of LBMA refiners in Switzerland and Australia.
For a layman it was not possible to tell that they were
fake. There clearly could not have been much gold in these
bars since the price was 0.1% of the value of real gold.
It would probably have been enough to scratch the surface
to find the tungsten which I assume was the metal inside.
FAKE GOLD WILL FLOOD MARKET
Learning about fake gold factories in China
gave me invaluable information of what will happen when
the gold price goes up. It became very clear to me that
the more gold appreciates the more fake gold we will see
on the market. The natural consequence of a higher gold
price will be a surge of gold factories around the world
making fake gold. As gold goes to $2,000, $5,000, $10,000
and much higher when hyperinflation sets in, there will
be opportunistic “entrepreneurs” flooding the gold market
with fake bars and coins. The coming gold mania will create
a massive demand for gold and desperate retail buyers will
buy gold from any source, unaware if it is genuine or not.
The coming shortage of gold will force buyers to obtain
gold from whatever direction, whether it is Ebay or disreputable
dealers.
BUY GOLD WITHIN THE CHAIN OF INTEGRITY
Eventually the media will catch on to the
prevalence of fake gold and tell buyers not to buy gold.
Professional investors are unlikely to be affected by this
but many retail buyers could be badly hurt. The consequence
of the “Wild West” market will be a concentration of gold
trading to the most reputable dealers who trade within the
chain of integrity. Some smaller dealers will survive but
only the ones who have established a long term reputation
of integrity and honesty. Any serious dealer must have the
testing equipment which can assure the quality of the gold.
The market is likely to concentrate to bigger
gold dealers which operate within the chain of integrity.
These companies will only buy and sell gold produced by
LBMA (London Bullion Market Association) dealers and refiners.
But that is of course not enough since fake gold producers
can make gold with the markings of an LBMA refiner.
SWISS GOLD REFINERS DOMINATE WORLD
MARKET
The absolutely safest way to acquire gold
is to buy directly from a top class LBMA refiner. The Swiss
refiners have the reputation of producing the highest quality
gold bars in the world. Around 70% of all the global gold
bar production comes from the Swiss refiners. The majority
of the bars made in Switzerland have 9999 (4 nines) or 99.99%
purity.
When our company (Matterhorn, GoldSwitzerland)
buys gold for clients, we always buy freshly minted gold
directly from the Swiss refiners like Argor or PAMP. That
guarantees the quality to the client. There is another very
important factor that makes this chain of integrity totally
unique. If we buy freshly minted gold from a refiner for
a client and the client (for whatever reason) decides to
sell the gold the next day, we would then sell the client’s
gold back to the same refiner. Even if the refiner receives
the gold in return in the same sealed boxes that he delivered
to us, the refiner would still melt all the bars down in
order to guarantee the quality.
It is this attention to detail and perfection
that makes the Swiss gold refining industry totally unique
and the biggest in the world. Gold accounts for 29% of Swiss
exports and makes it a strategic industry. This also is
a virtual guarantee that gold is unlikely to ever be confiscated
in Switzerland. Another advantage to deal directly with
a refiner, which a retail buyer cannot do, is that the refiner
is always guaranteed supply. The 3,000 tonnes of annual
mine production must be refined and the majority of that
will go to the Swiss refiners. This is a very important
consideration when gold demand goes up and there won’t be
sufficient gold to satisfy all the new buyers. When the
paper gold market collapses and the paper longs ask for
delivery there will be a massive shortage of gold. The increased
demand cannot be satisfied by more production but only by
a much higher price. At that point, only the companies that
have a long established relationship with refiners will
get supply of gold.