This is potentially chilling news for the gold markets -- word of tungsten filled gold bars coming from the Market Oracle site. As Before It's News has warned, there are many issues with "owning" any gold that is a paper product, as opposed to physical gold and if this story is true, you could see a huge spike in the price of gold in the near future as people scramble to own the real thing. Two issues have come to the forefront, according to Rob Kirby at Kirby Analytics...
1] - irregularities in the publication of the gold ETF - GLD’s bar list from Sept. 25 – Oct.14 where the length of the bar list went from 1,381 pages to under 200 pages and then back up to 800 or so pages.
2] - reports of 400 oz. “good delivery” bricks of gold found gutted and filled with tungsten within the confines of LBMA approved vaults in Hong Kong.
The reason to use tungsten to fill bars, as opposed to say lead or silver is based entirely on Physics and Economics 101. Tungsten, density of 19.35 g/cm3 is a near perfect match for the density of gold at 19.32 g/cm3. A bar of tungsten coated with gold would be very close to the same size and weight as a real solid gold bar. The main reason to use tungsten is the cost, which at $20 per pound is a small fraction of gold's $16,000 per pound. Large 400 ounce cast bars are easiest to fake because they can be cast, but coins would need to be stamped, something difficult to achieve with tungsten owing to its legendary hardness -- it's got a very high melting point and is difficult to work. Gold is soft, malleable and ductile, which is why it has been treasured for millennia. It will be difficult to spot the fake gold bars without sophisticated assaying equipment.
Here's where the story gets fun...
The amount of “salted tungsten” gold bars in question was allegedly between 5,600 and 5,700 – 400 oz – good delivery bars [roughly 60 metric tonnes].
This was apparently all highly orchestrated by an extremely well financed criminal operation.
Within mere hours of this scam being identified – Chinese officials had many of the perpetrators in custody.
And here’s what the Chinese allegedly uncovered:
Roughly 15 years ago – during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day. I know folks who have copies of the original shipping docs with dates and exact weights of “tungsten” bars shipped to Ft. Knox.
The balance of this 1.3 million – 1.5 million 400 oz tungsten cache was also plated and then allegedly “sold” into the international market.
Apparently, the global market is literally “stuffed full of 400 oz salted bars”.
If the market is stuffed full of 400 oz. salted bars, what are the chances that the GLD ETF has more than their share? Their prospectus contains this legal out...
Gold bars allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and, if a Basket is issued against such gold, the Trust may suffer a loss. Neither the Trustee nor the Custodian independently confirms the fineness of the gold bars allocated to the Trust in connection with the creation of a Basket. The gold bars allocated to the Trust by the Custodian may be different from the reported fineness or weight required by the LBMA’s standards for gold bars delivered in settlement of a gold trade, or the London Good Delivery Standards, the standards required by the Trust. If the Trustee nevertheless issues a Basket against such gold, and if the Custodian fails to satisfy its obligation to credit the Trust the amount of any deficiency, the Trust may suffer a loss.
...it's buyer beware in the gold market, no question. Work with a reputable dealer and own physical coins. Should you intend to take delivery of COMEX 400 ounce bars, send them directly to a trustworthy assay lab to verify you are getting what you paid for. If even half of this turns out to be true, the price of real, physical gold could rocket.
UPDATE: The Central Bank in Ethiopia discovered a fake gold bar problem a couple of years ago, as this article in the Museum of Hoaxes attests.
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