Owning gold…… pitfalls and how to avoid them

This post is also available in: Spanish

As gold comes to the fore in today’s world of finance, it behooves the large investor to know how the market operates. Simon Heapes of Anglo Far East offers a summary of the gold business in this, the first of three articles.

Fake Gold Bars and the “Good Delivery” solution

By Simon Heapes

Shiny? Yes. But purity is what counts.

Shiny? Yes. But purity is what counts.

The issue of authenticity of gold and guarding against counterfeits, fakes and fraud is as old as the subject of precious metals themselves.

During the Spanish occupation of South and Central America in the 15th through 17th centuries, much gold was stored at Fort San Lorenzo in Panama where it awaited under heavy artillery guard for the arrival of galleon to ship it to Spain’s refinery. On their journey the galleons would be attacked by pirates, usually British.

However, when the pirates acquired the gold, they had difficulty selling it even on the black market because its authenticity of purity would come into question without Spain’s refiner’s mark on the bars.

The same problems exist today but with a different breed of pirates. Several tons of gold imported into the UAE by traders and investors turned out to be fake on closer inspection, resulting in millions of dirhams in losses and high levels of stress to the victims.

BANK BARS

The standard Gold bar held as Gold reserves by central banks and traded within the professional markets is the 400-troy-ounce Good Delivery Gold bar. Specifications for Good Delivery Gold and Silver Bars as set forth by the London Bullion Market Association (LBMA) are that the gross weight of a bar should be expressed in troy ounces, in multiples of 0.025, rounded down to the nearest 0.025 of a troy ounce.

FINENESS:

The minimum acceptable fineness is 995.0 parts per thousand fine gold.

Marks to note

-Serial number

-Assay stamp of refiner

-Fineness (to four significant figures)

-Year of manufacture (expressed in four digits)

-Minimum gold content: 350 troy ounces (approximately 10.9 kilograms)

-Maximum gold content: 430 troy ounces (approximately 13.4 kilograms)

-Recommended dimensions (approximately)-Top Surface 255 × 81 mm. Bottom Surface 236 × 57 mm. Thickness 37 mm.

These bars are for the larger purchasers, totaling at current prices of perhaps half to three quarters of a million US$ dollars each. There is no sure way to actually test the interior of these large bars with a depth thickness near two inches per bar. Not even new methods of X-ray are officially accepted to insure purity all the way through to detect an inferior metal such as tungsten. The only sure way is by putting the bar back through the refiner’s process and melting it back down at great expense to the owner.

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