Beware of fake gold bullion

With the decade-long surge in gold prices, it's inevitable that gold counterfeits are proliferating. Some conspiracy theorists believe even official central bank gold inventories include tungsten, which has the same density as gold, and therefore harder to detect when embedded inside gold bullion bars.

Since the largest central bank of all--the Federal Reserve Bank, has not had an independent audit since 1953, who knows how much gold resides in Ft. Knox and the official US government mints. Add to the list of suspicious gold inventories at the COMEX and LBMA vaults, as well as the gold ETF's, which are allegedly backed by physical gold.

There is a growing disconnect between the countervailing forces for pricing: paper gold contracts are constantly sold short by the bullion banks in futures exchanges, while demand for physical demand remains high, propping up prices. Something has to give, and it will eventually.

Meanwhile, watch this video on how tungsten-filled gold bullion is detected.

http://www.youtube.com/watch?v=ZKczs-7BFRI

According to jsmineset.com:

BullionAnalysis LLC has developed a technological application that is unique to the precious metals market, for the purpose of determining if your bullion has been counterfeited by including tungsten alloy. This technology is completely safe and non-destructive to the precious metal, and will be effective on everything from fractional ounce coins all the way up to the full size 100, 400 and 1,000 ounce COMEX bars of gold and silver.

Their technological application has been developed in response to the growing threat to the bullion community from tungsten/lead alloy adulteration. Tungsten (19.25 g/cm3 density) has a density nearly identical to gold (19.32 g/cm3 density), and lead (11.35 g/cm3) will have a density very close to pure silver (10.45 g/cm3). Lead can also be alloyed with lighter elements to match even closer the density of silver. The threat arises from unscrupulous individuals and possibly institutions that have been removing precious metal from the center of bullion bars and replacing it with tungsten or lead alloy. Modern computer-aided machine tools are then used to seamlessly re-smooth the surface of the bullion product to hide any trace of the theft that has just happened.

Traditionally, the use of a density calculation (mass divided by volume) has been the solution to verify the assay purity of bullion. Unfortunately the insidious use of tungsten and other alloys that match the densities of gold and silver make this test completely useless for this type of problem.

Their new detection technologies are unique to the bullion market. They can detect tungsten/lead and other impurities and cavities that are hidden at any depth inside the bullion product and it is 100% completely non-destructive and safe.

In addition, they are able to produce tamper-resistant holographic-sealed assay certificates with the analysis results for the bullion item, that bear a digital image of the bullion product and show the serial number and hallmark if present. These tamper-resistant assay certificates could then trade with the bullion product and give both buyers and sellers a sense of real security.

At the present time they are focusing their efforts on delivering this service to depositories and institutions and plan to expand their services to cover retail gold and silver investors in the near future.

Fort Knox and conspiracy theories

Ft. Knox hasn't been independently audited since 1953 when Eisenhower was President. Many conspiracy theorists, including Ron Paul, believe the official numbers released by the Federal Reserve Bank are vastly overstated. GATA posits that each ounce of gold has been sold, swapped, or leased many times, as part of a surreptitious gold price suppression scheme, orchestrated by central banks with the help of bullion banks.

Even if the inventory numbers are true, Societe Generale believes the true value of gold is $6300/oz., based on USDollars floating in financial systems worldwide vs. above-ground gold tonnage.

As an aside, it was French President Charles de Gaulle who forced President Nixon to close the gold window, as the French wanted to redeem their USDollars for gold prior to 1971. Nixon had to end the gold standard, as the US Treasury had printed too many dollars to be backed by gold stored in Ft. Knox's vaults.

In any case, since the above-ground gold numbers are vastly overstated, $6300/oz. may be a conservative estimate for the price of gold.

Gold missing in Canadian mint

Back in June, after an audit by Deloitte & Touche discovered $15 million of missing gold bullion, the Canadian Mint called in the Royal Canadian Mounted Police for an investigation. It turns out mint official "double-counted" gold sales by mistake.

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20091124/mint_mystery_091124/20091124?hub=TopStoriesV2

I'm not buying it, as central banks are notorious for performing gold swaps, and leasing out the same gold ounce multiple times to each other, in a surreptitious gold and silver price suppression scheme (scam).

The Canadian mint has now agreed to an independent audit of their precious metals inventory every three months--which is a big change of policy and one that contrasts sharply with the US Federal Reserve Bank. The Fed's gold reserves haven't been independently audited since 1953, which means no one has any idea how much gold is in the vaults of Ft. Knox, Kentucky and the Federal Reserve Bank of New York.

Kinross Says Gold Industry Faces Reserve Crisis

That's the title of a Bloomberg article. Tye Burt, CEO of Kinross Gold, Canada's 3rd largest gold producer:

"Globally, production has been in decline since the peak of 81 million ounces in 2001 to 77 million ounces last year, and we see that decline continuing long term."

Which is interesting, because according to Ed Steer:

"the bullion banks are short north of 31 million ounces of gold... that's 40.2% of last year's gold production!"

I'd love an independent audit of the commercial banks' vaults to verify the physical inventory. In fact, an independent audit of the Fed's gold reserves at Ft. Knox, KY and in New York's Federal Reserve Bank is in order. An independent audit has not been performed at Ft. Knox since 1953, when President Eisenhower was in office.

Does the amount of gold the Fed claims it has in its vaults exist? Why do other countries report declining amounts of gold, yet the Fed insists its' inventory has remained constant over the years? And if so, why don't they open up their vaults for audit? What are they hiding?

Here is Stewart Dougherty's account of KMPG's annual "audit" of the Exchange Stabilization Fund (ESF):

"Even the Treasury Department’s clandestine $50 billion Exchange Stabilization Fund (ESF), which is only one-fifth the value of America’s reported gold holdings, undergoes an annual audit. For fiscal year 2008, this audit was conducted by KPMG, a well-known, independent CPA firm. KPMG’s 2008 ESF audit uncovered “significant deficiencies,” “material weaknesses,” a “weak control environment,” and “several control deficiencies.” If a Treasury organization subject to annual audits could fail its recent exam as broadly as that, what are we to assume about the safety and security of the people’s gold supply, which, like the national money geyser, the Federal Reserve Bank is never audited? And if the ESF is audited each year, what legitimate rationale can there be for not auditing the nation’s gold supply? Something isn’t adding up."

Here's the full length, but insightful article:

http://news.goldseek.com/GoldSeek/1248373722.php