Monday, January 20, 2014

Real gold? Are you sure? An examination of modern gold counterfeiting

Stacks of gold bars stored in the bank of England (from the Daily Mail). An impressive display of wealth, with only one small problem: can we be sure that it is real gold?

In life, I've discovered that there exist laws describing human behavior that seem to be as strong and inflexible as the laws of physics. One, that I call the "second law," says that if there is a chance to cheat, someone will (the first law is the well known one, "there ain't no such a thing as a free lunch"). The second law of human behavior may hold in particular with the ancient human activity called "counterfeiting", in particular of money and precious metals.

The advantage of gold as currency has always been that it was very difficult to counterfeit. From the time when Archimedes screamed "Eureka!" in his bathtub, it has been known that gold is much denser than anything else known. So, a good scale was all that was needed to discover if something was real gold.

But, today, things have changed: we have something that ancient gold counterfeiters couldn't even dream of: tungsten with a density almost exactly the same as that of gold and that makes density measurements nearly useless. Since gold costs almost a thousand times more than tungsten (ca. $ 40,000 per kg against about $ 50 per kg) you can understand that there is a lot of incentive for the second law to play a role, here: with a chance to cheat, someone will.

I spent some time looking into this matter and I can tell you that, yes, there may be problems with gold counterfeiting with tungsten nowadays (in minor measure, also with silver). Not so bad as some people say, but not to be underestimated. What I found is based on some 30 years of experience in materials science, but it doesn't claim to be the last word on the subject. If you know more details or you have different data, let me know. One of the things that I have learned in life (in addition to the second law of human behavior) is that you never finish learning.

1. Counterfeiting gold bullion.

The term "bullion" applies to nearly 100% pure (or "100% fineness") gold. Bullion ingots and bars come in different sizes: the typical kind traded between banks or governments comes in the "400 oz." size (corresponding to 12.4 kg). One such bar is worth today around half a million dollars and ordinary people won't normally ever see one, except in pictures. But gold bullion is commercialized in variable sizes and there exist much smaller ones, for instance ingots as small as just one gram. Dealers and goldsmiths also trade gold in the form of nonstandard bars or of foil, wire, and grains. In all cases, assaying methods are normally able to determine the fineness of the gold, but tricks with tungsten are possible and sometimes not easily detectable. There are two of these tricks, both are reported to have been actually used.

Gold plated tungsten bars and ingots. The start is a pure tungsten bar. Such bars need special equipment to be made but seem to be available on the market, although it seems that counterfeiters also use tungsten carbide (TiC) or "Tungsten Heavy Alloy" (WHA). These materials are almost as dense as pure tungsten but easier to manufacture by powder sintering in the form of massive bars. Then, counterfeiters wrap the tungsten in gold foil 1-2 mm thick and then weld the two contacting surfaces by high-temperature treatment. It is also necessary to treat the object in such a way to remove the "seam" were the edges of the wrapping foil touch each other, but that can be done with good welding skills. The final result is an object that is pure gold in the first few mm, but pure tungsten (perhaps carbide) below. The gold layer is thick enough that it can be stamped and punched as if it were solid gold all the way inside. Apparently, you can also buy these gold plated bars already made! The final result can mislead even experts if they limit themselves to visual examination and weighing. Also, the gold plating is thick enough that it makes the underlying tungsten undetectable to most common assaying methods such as X-ray fluorescence. There are only a few ways to detect the scam. Ultrasonic testing should work, although it may not be enough. Then, if the tungsten is in the form of carbide or WHA, it could be detected by a strong magnet, since both contain small amounts of magnetic metals (typically nickel), but note that the magnet would detect nothing if the tungsten is in pure metallic form. In practice, the only way to be sure of the scam is by drilling a hole in the object. That will immediately reveal the hard and dark colored tungsten inside. For a report of this counterfeiting method having been actually used, see here

Tungsten bars buried in gold ingots/bars. It is done by inserting one or more tungsten bars/billets in a gold ingot or bar. It can be done while the gold is being melted in a crucible, or it can be done drilling a hole in the gold ingot, hammering in the tungsten bar, then plugging the hole with a pure gold plug and welding everything in order to obtain a smooth surface. In this case, the tungsten may be only a fraction of the gold, nevertheless it provides a nice profit for the scammer who has succeeded, in a way, in the feat of transforming a vile metal into gold. This trick is very difficult to detect because even drilling a hole in the ingot doesn't guarantee to find the foreign object inside. You need to slice the ingot salami style or remelt it. However, ultrasonic examination will immediately detect that there is something wrong inside. For a report of this counterfeiting method having been used, see here.

2.  Counterfeited gold coins.

Gold coins are a popular form of gold trading, diffuse among private owners. Their weight may go between 1 oz to 1/10 oz. They are rarely pure gold because they would be too soft, more typically they contain slightly more than 90% gold in weight, that is they rate as "22 carats".

There are standard and well-known ways to counterfeit gold coins: the substrate can be made in brass or silver and then coated with a thin layer of gold - it can be done electrochemically. These fake coins are easily detected simply by weighing them: brass and silver are much less dense than gold. But, as I said before, tungsten has the same weight of pure gold, so if the substrate is in tungsten, weighing is useless to detect the scam. The problem, here, is how to manufacture a believable tungsten coin to be later coated with gold. Metallic tungsten is extremely hard - stamping a tungsten disk with an ordinary press simply wouldn't work. Perhaps it could be done with special and expensive equipment and maybe by hot-forming tungsten carbide or WHA. Both methods would be very expensive and require remarkable expertise. However, assuming that it could be done, the tungsten coins could be electroplated with gold and would have the right weight for a real gold coin. The trick could be detected only by expensive equipment such as X-ray diffraction. At home, the scam could be detected only by scratching the surface with a file to see the dark color below. But that could also ruin a perfectly good coin.

Do such coins actually exist? I think not. I searched the Web but there is no hard evidence of real tungsten coins anywhere. Sure, there are web sites which purportedly sell you gold-plated tungsten coins. But I just don't believe that: what gives the game away, in my opinion, is that they only sell already plated coins. They don't even show pictures of the coins before plating. If they had unplated tungsten coins, they should be happy to sell them to people who would then plate them at home - that's the easy part (and possibly the illegal one) of the counterfeiting job. So, if you shell out the $1000 (the minimum that I found is needed) to buy the advertised coins, then you'll probably receive just the ordinary kind of gold-plated brass coins. Of course, you would complain. Sure, and then?

On the whole, I think that gold-plated tungsten coins are just a legend and not something to be worried about; at least for the time being.

3. Fake Jewellery. 

Jewels come in a wide variety of shapes; rarely at grades higher than 18 carats (75% gold in weight). Since there are so many varieties and so few standards, it is with jewels that counterfeiters have traditionally found their favorite playground. There are many ways to make fake gold jewels and counterfeiters are helped by the fact that often we have composite objects for which it is difficult to make precise density measurements. Nevertheless, in some cases, such as for a simple ring, it is possible to tell if a jewel is gold plated brass or silver simply by weighing it and measuring its density. The problem is, again, with a tungsten substrate. Weighing, in this case, is useless.

Here, I think scams could exist. Search in the Web for "tungsten jewelry" and you'll find many companies selling you tungsten jewels, especially in the form of rings (actually, they are usually made in tungsten carbide). These jewels are real: they are shown in pictures and there are reports of people having bought them. Of course, there is nothing illegal in selling tungsten carbide rings and bracelets, although most of us would find them a little dull. The problem is that someone could plate them with gold and sell them as if they were pure gold. The weight would be the right one for 18 carats gold and even experts could be fooled. I wouldn't be surprised if it were actually done (remember the second law of human behavior!). However, for the time being, there don't seem to exist reports of people having been sold gold-plated tungsten jewelry as it were real gold. It may be because it is still a new idea. In this case, we'll see such reports appearing soon.

5. Silver counterfeiting

All that I was saying about gold can be said for silver as well. Traditionally, silver coins and bullion have been counterfeited using brass as substrate. But the scam is easily detected using a scale. So, in modern times, counterfeiters could use molybdenum rather than tungsten, as molybdenum ("moly", for friends) has about the same density as silver. Also here, it is probably possible to make fake silver ingots, bars, coins and jewels with the same technologies described for gold. The problem for the counterfeiter is that the monetary gain is much smaller: silver is worth much less than gold, while moly still costs about 1/10 of silver by weight. So, it is not obvious that all the work and the effort to replace silver with moly is worthwhile. Since there are no reliable reports of this kind of scam being actually done, I think it must be very rare - if it exists at all. So far, silver seems to be relatively safe.

6 - Defending yourself from gold and silver scams.

The defense against the kind of scams we have been discussing here depends on who you are and on what kind of resources you have. If you are a bank, you probably already have expensive and sophisticated gold assaying equipment and you feel safe (but don't forget the second law!). If you are a mafia boss, you know what to do with the cheaters who sold you counterfeited gold. If you are an ordinary person, however, you can't afford sophisticated equipment and you don't have henchmen who'll send the cheater to sleep with the fishes. You have to do your best with simple equipment and good common sense. In this case, I think I can suggest the following:

1. Buy thin. Thin objects (such as coins or small ingots) are difficult (and probably impossible) to fake with tungsten and molybdenum. That will defend you from most of the modern scams we have been discussing here.

2. Learn how to measure density. It is easy (see, e.g., here) and all what you need is a good electronic scale that will cost you less than $ 50. You can also use scales specifically designed to test gold coins. These methods can't detect tungsten, but they will defend you from old-style scams (brass in the place of silver and silver in the place of gold). Note, however, that these measurements become difficult for very small objects, let's say under 5 grams.

3. Get a strong magnet to test your gold - it is a good idea in particular for jewelry. You can buy extra-strong rare earth magnets for a few dollars over the Web. If your gold doesn't stick to the magnet, that doesn't necessarily mean it is real gold but, if it does, surely there is something badly wrong with it. This test should reveal scams done with steel and also with tungsten carbide or WHA, which contain magnetic elements such as nickel. (silver is a somewhat different matter, as it is slightly attracted by strong magnetic fields)

4. Never forget the second law of human behavior: "if there is a chance to cheat, someone will."

7. Large-scale counterfeiting

On the whole, it seems that there is little to be worried about for an ordinary person who buys small amounts of precious metals, especially if one takes some elementary precautions. However, this story leaves us with the impression that, with the advent of tungsten, gold has lost some of its glitter.

The problem is that the temptation of faking a large gold bar is strong: replacing a 300 or 400 oz bar with one in tungsten means making a few hundred thousand dollars with a relatively modest effort. And the scam is difficult to detect: if the bar rests in the vault of a bank or of a government facility, it may well stay there for decades before anyone will test it in ways that could detect the tungsten inside. Not surprisingly, it has been done; even at the level of National Banks. I have also reports from sources which I consider reliable in the gold industry telling me that the actual cases of tungsten scams are much more common than it would seem from what the media report. Yes, there are nice rules that should prevent such occurrences, such as the Gold Good Delivery standard. But all certifications are made by people, and people can be corrupted - especially when we are talking of millions of dollars. Remember the second law of human behavior: "if there is a chance to cheat, someone will"

Does that mean that, as some people said, the gold bars stored in Fort Knox are all in tungsten? Well, I think not, but pause just a moment to think: if they were fake, how would we know?


Ugo Bardi is a member of the Club of Rome, faculty member of the University of Florence, and the author of "Extracted" (Chelsea Green 2014), "The Seneca Effect" (Springer 2017), and Before the Collapse (Springer 2019)