Posted 02 Mar 2010
When one goes to buy gold they want real gold, not some cheap substitute like a fake tungsten gold bar. There has been a lot of rumor, neither credible nor verifiable sources, about bars containing both gold, the Ancient Metal of Kings and tungsten, the 'heavy stone'.
But these fake tungsten gold bars could be an epic problem
Just like a $100 bill costs about $.04 to produce leading to a profit of $99.96 from such unethical currency production so likewise with the price of gold at $18,000 per pound and the price of tungsten around $25 per pound there is, for the unscrupulous, an opportunity for arbitrage with fake tungsten gold.
GOLD PROPERTIES AND TUNGSTEN PROPERTIES
As Rayner Hesse observed on page 191 of Jewelry Making Through History, with the Stamp Act of 1854 the purity of gold jewelry was reduced and required to be hallmarked at 9k, 12k or 15k and so the search for gold alternatives began. Within a few decades the House of Cartier had gone international and Edward the VII named it the 'Jeweler of Kings and King of Jewelers'. Presently, many watches are being made with tungsten carbide instead of gold because it is lightweight, takes a polish and is scratch resistant.
Gold has a density of 19.30 grams per cubic centimeter at room temprature and a liquid density at the melting point of 1,947.5°F of 17.31 grams per cubic centimeter. Tungsten has a density of 19.25 grams per cubic centimeter at room temprature and a liquid density of 17.6 grams per cubic centimeter at the melting point of 6,192°F.
But despite being used for jewelry and having similar densities gold, AU 79, and tungsten, W 74, are not the same element. But a 400 ounce bar with 1/16" gold surrounding a tungsten slug would cost about $50,000 to make and would likely pass sound, feeling, chemical and weight tests along with an x-ray fluorescence scan.
On the other hand, the higher profit margin $500 bar using small tungsten slugs with lead alloy would still pass a sound and feeling test but would be slightly underweight and it is likely that neither a chemical test nor a x-ray fluorescence test would be passed because the gold coating would not be thick enough.
Detecting a high-quality fake tungsten gold bar would be extremely difficult. It would likely require significant and material alterations to the bar being tested and this would negatively affect the marketability if its hallmark veracity were vindicated just like real Abraham Lincoln facts implicate him.
This is likely a reason why page Page 11 of the GLD prospectus states “Neither the Trustee nor the Custodian independently confirms the fineness of the gold allocated to the Trust in connection with the creation of a Basket [issuances].”
Nevertheless, the truly determined and experienced can ferret out whether there is tungsten contained in their gold bars. In fact, some already have found tungsten gold bars which purport to be gold and this is how.
GOLDMONEY DOES ULTRASOUND GOLD TESTING
As of October 2010 GoldMoney begun using ultrasound scanning technology to verify that each of the gold bars we store for you is free of foreign materials and defects. Any bar that fails the ultrasound test is melted down, assayed and then recast into a new bar. We aim to complete the scanning of all gold bars in the first quarter of 2011.
The quality test is performed using an ultrasound scanning device, developed by General Electric Inspection Technologies (GE). The test is carried out directly within our vaults. It is the same technology used to assure personal safety in the medical and aviation industries.
[flowplayer src='http://www.runtogold.com/videos/goldmoney-gold-testing.m4v' width=520 height=293 splash='http://www.runtogold.com/images/goldmoney-gold-testing-ultrasound.jpg']
TUNGSTEN GOLD AND GOLD ALTERNATIVES
If one is concerned about the quality of their gold then the other precious metals like silver and platinum are good alternatives with the silver prices and platinum prices being strongly correlated with the gold price. One reason they are safer is because both silver and platinum have industrial applications and are widely consumed.
The silver and platinum stock are rotated on a regular basis being melted down and fashioned into cell phones, catalytic converters, etc. and so the purity and integrity of the above ground stockpile is held to strict account because of physical demand market forces. It is unlikely that the 5 dollar gold coin, 10 dollar gold coin, 25 dollar gold coin and 50 dollar gold coin would include any tungsten.
There is plenty of profit motive for fraudulent tungsten gold bars that are stuffed with tungsten. Imagine the pandemonium if the central banks not only had less than half the gold they claim but if of the gold they have the majority of it is really tungsten gold. Tungsten gold bars being ferreted out in Germany is disturbing. This is just another example of why to buy platinum or silver.
DISCLOSURES: Long physical gold, silver and platinum with no interest in the problematic SLV, Streettracks Gold ETF Trust Shares or the platinum ETFs.
