In Switzerland, thousands of tons of gold are stored and produced every year. More and more vaults are being built as international investors continue allocating more wealth in precious metals. But how do those investors know that their gold is real? The tests described below can afford some certainty and peace of mind.
As stock markets and bonds look toppish, if not highly risky, gold has just started its next ascent after a long and extended bear market. The signs of a bottom are plain as day. Nobody wants gold. Well, not “nobody”, but the vast majority of “experts“ and investors currently shun the yellow metal. Great times for contrarians!
Now is Indeed the time to increase our gold holdings. But how do we know that what we stored in that vault is real gold? The following tests and strategies can help you avoid unpleasant surprises.
1. Beware of “discounted gold” and “bargains”: Whenever “hot bargains” and “last chance to buy” offers make the rounds, the general rule is to just stay away. As always, there is no free lunch. Whenever gold coins or bars are offered at a discount, your alarm bells should be going off. Why should anybody sell you gold at spot or below when there’s a liquid market that will pay more?
2. Look at the goods carefully: Sounds like we’re stating the obvious, right? Well, you’d be amazed how many people don’t do that. Have a close look at what you buy! Common sense and an eye for detail can take care of some issues from the outset. For example, check the bar numbers. If you find gold bars with the same numbers, you’re looking at forgeries.
3. Compare minting: The minting of bars and coins can easily be compared to authentic originals, or to pictures on trustworthy websites. If a product differs from the norm, you need to take a closer look and get help from a qualified assayer or precious metals expert.
4. Stick to standard bar weights: In line with the London Bullion Market Association (LBMA) standards, the following weights for gold bars are common: 1g, 2g, 2.5g, 5g, 10g, 20g, 1 troy ounce, 50g, 100g, 250g, 500g and 1000g (1kg). If a bar comes in a different weight, that’s an indication of “Fake Gold”.
5. The magnet test: For some time now, there are bars in circulation that have exactly the same weight as real gold bars. However, the core of those bars is made of a cheaper metal, generally Tungsten. The easiest test is to check if the bar reacts to a magnet. Real gold is not magnetic.
6. The sound test: This test is most suitable for gold coins. When you drop real gold coins on a hard surface, you will hear an extended and clear sound, similar to a musical triangle. Of course, this may not be a test easily used by everyone. The less musically talented may not hear the difference at all. Professional assayers are amazingly accurate in this regard, however.
7. The bite test: Since gold is a “soft metal“, gold products are fabricated with an alloy surface that is substantially harder than gold. If the famous bite into a gold coin leaves an indentation, it’s probably a fake.
8. The sucking test: Seriously, this might be your best option. You can suck on or lick your gold. Since gold is a precious metal that reacts chemically with very few other elements, the taste of real gold will be relatively neutral. A coin made of brass or other metals will taste very different. It will react with the elements of your saliva and result in a clearly metallic taste.
Of course, professionals have access to more sophisticated technology and systems, but it may come in handy to know the above. When it comes down to it, the best advice is to buy your precious metals from trusted parties that have been in the business for an extended period.