Counterfeit Gold: How to Spot Fake Gold?

For as long as gold has been considered a valuable metal, there have been counterfeiters trying to exploit it, to con and scam their way to an easy fortune. Ancient alchemists tried to turn base metals into pure gold, making a fortune from cheap, worthless elements, and while they never figured out the formula, the counterfeiters did.

As an investor, it’s important to know what you’re buying and to get exactly what you pay for, because nothing wipes out your investment like discovering that your gold is not as legitimate as you thought it was and that the eBay trader who sold it to you didn’t have your best interests at heart after all.

History of Counterfeit Gold

In 1853, Gideon B. Smith patented the first fake gold coin detector, which became an essential piece of equipment. Prior to this, people would run rudimentary checks to determine whether a coin contained real gold or a cheap base metal. This included spitting on the coin and then rubbing it against an abrasive surface, hoping that the gold-colored surface would rub off and that the base metal would show through.

Although basic, many of these methods worked, simply because counterfeiting methods were just as basic. However, fake gold coin detectors gave testers a huge advantage in the war against fakes and for many years they had the edge. It didn’t take long for the counterfeiters to turn the tables though, and history is littered with stories of counterfeit gold.

There are even reports of fake gold coins existing as far back as 600 BC, when the edges of a real gold coin were shaved off and then used to cover base metal coins. Similar practices were employed in the middle ages, but counterfeit coins didn’t become widespread until modern times.

In more recent times, fake gold coins have been used in warfare, with countries attempting to destabilize their enemy’s economy, and the famous 1907 Double Eagle coins, minted by the US Mint, created an uproar when it was discovered that they were being counterfeited on a grand scale.

A few years ago, it was reported that fake gold was being sold in Manhattan, New York. A buyer purchased several 10 ounce bars worth $18,000 each and, for whatever reason, he decided to drill into them. He discovered that these bars had tungsten cores and contained just $3,600 worth of real gold.

The frightening thing about this story is that the bars had real serial numbers and they came with official papers. The counterfeiters had purchased real gold bars, before hollowing them out, siphoning off a large percentage of the gold and then leaving something that looked real, official and valuable, but was most certainly not.

Fortunately, there are ways you can make sure this never happens to you, and ways that you can check to see whether or not the gold you have is real or fake.

How to Avoid Fake Gold

Fortunately, while fakes are perhaps more common than they have ever been, it’s easy to avoid them. There are a lot of strict protocols and procedures in place to ensure that reputable bullion dealers only sell the real deal. You just need to make sure that you use one of these dealers.

At GoldBroker, we only work with LBMA certified refiners. These refiners have all met the minimum standards set by the LBMA, allowing them to appear in their Good Delivery list. All bars on this list have been created to a strict minimum purity under exacting assaying conditions. These bars are universally recognized as the de facto standard for gold bars. We also store all of our gold in a secure system and ensure that the gold our clients buy and store has never left this system.

If you’re buying gold in large quantities, you should always purchase from an LBMA accredited refiner and dealer, and you should also trust in reputable dealers and refiners when buying in small quantities. These days there is a trend for investors to purchase on eBay, where the variety is often better, but everything else is not.

Everything is usually cheaper on eBay, but that is not the case with bullion, as the fees charged by eBay and PayPal mean that dealers have to attach signifiant premiums on top of the spot price. The main issue with eBay, however, is the fact that counterfeit gold products are rife.

There are many factories in China that sell “gold-like” coins for next to nothing, and unscrupulous dealers buy these in bulk, claim they are the real deal and then sell them on for a significant profit. Fortunately, buyers are becoming more aware and these dealers don’t stay active for long, but unfortunately, many of the fake coins they sell end up back on the auction site, sold by users who are either oblivious to the legitimacy of the product, or are hoping to make some easy money.

We’re not going to tell you to avoid using eBay altogether. But if you do use it, you should remember that most reputable dealers and users will charge higher premiums to offset eBay fees, and if you spot a low price that looks too good to be true, then it probably is.

How to Spot Fake Gold

In a moment we will look at ways that you can test your gold to determine if it is real, but you can also simply look at it, searching for specific marks and stamps.

Most pieces of real gold, including coins, bars and jewelry, should have a stamp that shows the purity of the gold. You may need a magnifying glass to see this, but you should be looking for a mark that displays either the fineness of the product (such as “.999”) or the amount of karats that it contains (such as “24k”). However, do not assume that just because your piece has these marks it is genuine. Many counterfeiters will add them to fakes to make them appear more genuine.

You should also look for discoloration. This may be hard to spot in a piece that is brand new, but if it is old, if it has experienced a significant amount of wear, then you should be able to see noticeable discoloration. This is especially true with jewelry, in which case you should look near the clasp, which will have been handled more. If discoloration does appear, then your item may only be gold plated.

The color of the gold itself may also be an indicator, although you need to remember that some gold coins, including the Gold Sovereign and the Gold Krugerrand, are not 100% pure. They both have copper added to them, which gives them a unique reddish hue.

How to Test Fake Gold

One of the fallacies surrounding gold is that it is so soft you can bite it and leave an indent. This is why Olympians jokingly bite their gold medals. The truth is that people did used to bite gold in order to test it, but only because lead was commonly used to counterfeit gold and lead is even softer than gold. So, they were hoping the metal would not indent, and not the other way around. Also, these days Olympic gold medals contain at least 92.5% silver and only a fractional amount of gold, so they might be disappointed to learn that their medal is (technically) fake after all.

Biting aside, there are other ways that you can test to determine whether what you have is real gold or not:

  • Magnet Test: Gold is not magnetic, so you can use a magnet to determine whether what you have is actually a cheap base metal. This is not an all-encompassing test, as it may consist of another non-magnetic metal, but it certainly helps to narrow down the field.
  • Scratch Test: For this test you need a non-glazed ceramic plate, and the goal is to drag your coin/bar across the plate, scratching the surface. If the scratch is black or grey, it’s not real gold. If the scratch is gold, then it is genuine. Bear in mind that this technique may damage your gold.
  • Acid Test: For a bit of etymological history, the term “acid test” actually comes from gold testing. This test involves nitric acid and can be dangerous to you and damaging to your piece, so it is often best left to an expert.
  • Density: Gold is a very dense metal, and the purer it is, the denser it is. Therefore, you can run a density test to determine whether what you have is real or not.

You can also send your gold to an expert. They will check and grade it for you and in the case of gold coins, this grading may even improve its value. However, these gradings are not cheap, and they are therefore not viable if you’re fairly sure that what you have is fake, or if the piece is small, common and otherwise inexpensive.