03 March 2010

Fake Tungsten Gold Story

The gold bars filled with tungsten story is getting another run - see Zero Hedge and RunToGold.

Nick from ShareLynx Gold passed on to me today the following from the producers of the video (all personal info was removed by him before forwarding):

vielen Dank für Ihre Anfrage.
MANY THANKS FOR YOUR ENQUIRY

Das Video ist tatsächlich bei Argor in der Schweiz aufgenommen worden, allerdings in einem ganz anderen Zusammenhang.

THE VIDEO WAS EFFECTIVELY TAKEN AT ARGOR IN SWITZERLAND, ALTHOUGH IN A COMPLETELY DIFFERENT CONTEXT

Unten eine englischsprachige Erklärung hierzu, die Ihnen einige weitere Hintergrundinformationen gibt. Der Barren wurde übrigens schon vor über 10 Jahren bei Argor zum Einschmelzen abgegeben; sofort entdeckt und aus dem Verkehr gezogen. Gefälschte Barren kommen extrem selten vor, unsere Kollegen in den Schmelzen können sich an keinen Fall in den letzten Jahren erinnern, in denen ein solcher bei Heraeus zur Aufarbeitung eingeliefert wurde.

BELOW AN EXPLANATION IN ENGLISH TO THIS ISSUE, THAT WILL GIVE YOU SOME FURTHER BACKGROUND INFORMATION. THE BARS, BY THE WAY, WERE DELIVERED TO ARGOR ALREADY MORE THAN TEN YEARS AGO FOR SMELTING; WERE IMMEDIATELY DISCOVERED AND WITHDRAWN FROM CIRCULATION. COUNTERFEIT BARS ARE EXTREMELY RARE, OUR COLLEAGUES FROM THE FOUNDRY CANNOT RECALL A SINGLE INSTANCE IN THE LAST YEARS IN WHICH SUCH A BAR WAS DELIVERED TO HERAEUS FOR PROCESSING.

Statement:

The video shown on www.youtube.com is an extract from the weekly German television broadcast Galileo that discusses scientific topics. This particular broadcast covered the topic of gold including testing the purity of gold bars.

The presentation of the scene of (gold) production at the Argor Heraeus refinery – that was put on youtube.com in another context – when seen together with the text could therefore give an incorrect impression.

The false bar shown in the broadcast was a bar not produced by Heraeus; it was sent to the company for refining and detected already at the time of delivery. Compliance Management at Argor-Heraeus is very important and plays an important role at the company. Among others, it has very stringent rules for handling and dealing with precious metals.

Therefore, and combined also with strong and effective quality controls, Argor-Heraeus is able to assure the authenticity of gold bars produced by the company itself at all times.

Internet: www.heraeus-edelmetallhandel.de
Heraeus Metallhandelsgesellschaft mbH
Heraeusstr. 12-14, 63450 Hanau, Germany


So the video is about ten year old fake bars. Another example of commentators jumping the gun and hyping a story without any fact/background checking. To be fair, it really is only someone like Nick who has a worldwide well-connected subscriber base who can do that sort of checking.

I also find it interesting that the video Zero Hedge linked is the only upload of YouTube user wolframgold who only joined on 28 Feb 2010. This leads me to a conspiracy I am surprised none of the more rabid commentators have come up with yet, namely that the source of the tungsten rumours since October 2009 is either a refinery/mint trying to scare people away from the secondary market and ebay and into only buying new bars and coins OR producers of testing equipment!

Nick also passed on to me a link to BullionAnalysis.com, which has some nice pictures of fake Englehard silver bars that their equipment would have detected. This does undercut RunToGold's conclusion from the tungsten scare that "if one is concerned about the quality of their gold then the other precious metals like silver and platinum are good alternatives". Ouch.

I would also disagree with RunToGold's statement that "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."

Ultrasonic testers will do the job without having to damage a bar. I quote some techo stuff from KK&S Instruments:

The 1090 Flaw Detector allows you to look into the Bar for voids/defects as well as UT velocity which is determined the products elastic modulus i.e Tungsten Velocity is 5183-5460m/sec and Gold is 3,240m/sec. For example if you calibrate for Au then the testing Tungsten bar of the same thickness, the UT thickness would read approximately half the actual because of the speeding-up of the sound through the Tungsten.

Problem is that it does require some technical knowledge to use the machine, so out of reach of retail investors and small coin dealers. It is probably prohibitively expensive as well.

I also think that it is fairly likely that the unintended consequence of commentators pushing the tungsten story is to drive mom & pop newbie gold investors into the ETFs. Making the decision to buying gold is a big change for the average investor and you can be sure they are seeking reassurance. Sow doubts in their mind about the "dangers" of physical gold and you will push them into ETFs, because mom & pop see them as regulated and thus safe. The very opposite of what many (if not all) commentators would want. I doubt they think about these consequences when they are looking for their next headline.

7 comments:

Alan von Altendorf said...

Thank you for straightening out the tungsten story, Bron.

Bron said...

Follow the comment to my blog at Seeking Alpha http://seekingalpha.com/article/191888/comments

Gordon said...

Hi Bron,
Completely off topic while awaiting your next post. I recently bought a 1kg bar from the PM. It has 7 numbers on it, but they seem random with no hint of a dating system. I understand that the old 400oz numbers from AGR Matthey had a system of 6 numbers alongside a year date. Is there any rationale to the current numbering system?

Thanks.

Bron said...

The kilo bars are just sequentially numbered with no date "info" in the number. To retail customers buying at different times they can seem all over the place due to the fact that the kilo is very popular in the Asian jewellery trade so ton lots are often exported, resulting in "gaps" in numbers.

The shop and depository also can buy in lumps and run that stock down over a period of time (which will have "old" numbers) and then you have the buybacks from clients (but not much of that going on at the moment).

Gordon said...

Thanks Bron.

Jayson Oates said...

Thanks for sorting the Tungsten story - here is something else -
http://www.zerohedge.com/article/former-goldman-commodities-research-analyst-confirms-lmba-otc-gold-market-paper-gold-ponzi
You may have already seen it at zero hedge with statements made to the CFTC implying that the LMBA IS fractional???????
This needs to be discussed!

Gordon said...

To follow-up Jason's request could you perhaps contrast this story with the article put out by Janet Tavakoli on cornering the gold market?

On one item in particular you may have some insight, that is: Step3:Book up all of the space at gold refiners, so that no one else can do it.

Tavakoli is a genuine world authority on derivatives so this article must carry some weight.

It can be found here