Gold continues to be the best crisis hedge investment - but only if you know how to avoid buying fakes.
You see, as gold becomes a more important investment than ever to protect against a global economic crisis and looming market crash, gold counterfeiters are busier than ever looking for their next victim.
In June 2014 two suspects were caught in New York for multiple incidents of selling fake American Gold Eagle gold coins on Craigslist. In January a Portland, Ore. small business owner spent thousands of dollars on gold ingots, only to learn they were counterfeit. Last year fake gold bars were discovered in reputable jewelry stores in Manhattan.
And many more investors will get scammed this year as they look to get a piece of gold's value.
That's why we put together the seven best methods you can use today to test if your gold is the real deal. Take a look.
Whether we're talking about coins, wafers, or bars, the producers of these items usually have very exacting standards. So a little research goes a long way to making sure you get what you expect.
Find out what the true dimensions of the item should be, and then compare them to what you have.
To do this, buy yourself a good-quality pair of calipers so that you can measure the diameter, thickness, or other dimension of your gold item very precisely.
Gold is a very dense metal, so some counterfeiters may make a coin in a wider diameter, in order to compensate for a less dense metal. If you compare gold to iron, it takes twice the volume of iron to equal the same weight of gold.
Plating other metals with gold still allows them to match the proper weight, but the size would be off. The difference could be very minor, but if you know what to look for, you can spot the fake.
Another way to find out if your gold is real is testing your object's magnetic properties.
You see, gold is not magnetic. So if it sticks, your gold is fake. But to do this, you'll need a stronger-than-average magnet. The kind available from a specialized hardware store should do it.
Keep in mind that counterfeiters obviously know this too. So they'll typically use metals that aren't magnetic to avoid this type of detection.
Just don't use this test alone.
The first step on your road to millions starts here: All you need is a computer or smartphone and just 10 minutes of “work” to potentially put $1 million in your bank account faster than you ever dreamed. Read more...
Get yourself a good-quality, precise scale. Then, based on the stated weight on your coin, wafer, or bar, it should match up perfectly.
Keep in mind though that gold is weighed in troy ounces. One troy ounce is equal to about 1.09714 "avoirdupois" ounces, which is the normal 1-ounce measurement we use in everyday life.
Knowing what you're looking is certainly one of the best ways to tell if gold is real. It's a learned skill, but keep an eye out for anything that looks odd or abnormal.
You can search for high-quality images of your coin or bar, then compare that with what's in your hands. Be meticulous in your search for minute details, all of which must be spot on.
Gold coins are a good option for gold "investments." You see, counterfeiters will often (but not always) fake larger gold items because it's more worth their while. After all, if you're going to go through all of the painstaking trouble and risk, the payoff might as well be big.
The test methods we've described so far apply to pretty much any form of "investment" gold. But if you take the leap and acquire a larger-sized gold item, there are a few other tests that can be performed for veracity.
The truth is, anyone who owns gold in the form of a larger bar, say, 10 ounces and up, ought to consider having it verified.
Another option to know if your gold is real is known as the fire assay test. This is typically used by gold explorers/miners who require absolute certainty that their drilled samples are the real thing.
Fire assays are an ancient method. They are the most widely used and considered the most reliable. The downside is that it involves drilling into the gold bar to provide at least 0.5 gram (0.2 ounce) to be tested. Some feel removing even a small quantity of the bar will take away from its integrity. But some gold bullion dealers, for their own assurance, will decide to cut your bar if you've agreed to sell it to them.
Another downside with fire assays is that you're really only testing the small portion you've sent to the testers. So if there is a void or other metal in the center of the bar, the test won't find it.
Assay testers will usually take about three days and charge about $35 to test a gold sample. They'll also provide an official signed report with the results.
X-ray testers are another option to check if your gold is real. Jewelers will sometimes use these to test any gold they buy.
The tester quickly performs chemistry analysis to determine what elements are present in the gold. They also can tell the purity and fineness of the metal.
X-ray testing does have a ±1% accuracy rating, so while minor, there is some chance for error. The other drawback is that it's essentially a surface test, so if there's a void or another material in the center of the bar or coin, then X-ray testing won't detect it.
On the plus side, it's nondestructive and non-intrusive, so the integrity of your gold won't be compromised. You'll know, at least, if the surface of the item is real gold.
Ultrasound testing is a way to "look into" your gold to tell if it's real. It uses the same ultrasound technology that's used to check fetal health during a pregnancy.
Essentially, this method scans the item, providing a digital image of the gold bar.
If there is an air gap or other material inside the gold bar, this will show up as a darker area on the screen's image.
This is expensive equipment, so it may be challenging to find someone who could provide testing services.
The advantage is that ultrasonic flaw detectors can actually "see" the inside of your bar, so the results provide a high degree of confidence in the bar's integrity. If you want to see exactly how this works, click here to view a short video demonstration.
Of course, there are other tests you can do to mitigate your risk of ending up with fake gold. Probably the single most important thing you can do is to buy your gold from a reputable dealer.
While it sounds obvious, a little research can go a long way in determining if your gold is fake or real. Ask friends or acquaintances for referrals and check the website of a government mint for "partner" bullion dealers.
Also, consider buying from dealers that offer a product guarantee, as well as a future promise to repurchase anything they previously sold to you.
#1: Make sure you allocate roughly $1 in gold for every $10 you have in bonds.
The conventional thinking is that holding between 5% and 10% of overall assets in gold can provide meaningful diversification and a hedge against inflation. But despite what you see on those late-night television commercials, gold has never been proven to be a significant inflation hedge. It has, however, been proven to be a great crisis hedge and one that is more perfectly correlated to interest rates, which are, in turn, driven by inflationary pressures and global risk, especially lately.
So owning $1 of gold for every $10 you have in bonds is the best way to hedge your risk in today's volatile global markets.
In practical terms, let's say you have $10,000 in bonds. Using the 1:10 ratio would mean you'd also have $1,000 in gold socked away using exchange-traded funds, bullion, or something like the very popular Perth Mint Certificates.
#2: Maintain that ratio with a 20-minute annual rebalancing.
The gold price is obviously getting fairly volatile these days, so you don't just want to set it and forget it. "Buy and hope" isn't a viable investment strategy. Instead, my suggestion is to rebalance the gold/bond relationship at least annually.
Pick a day like your birthday or the start of the New Year and lock it into your calendar so you don't forget. Rebalancing should take you all of 20 minutes.
If you’re looking to end 2018 with $1 million in your account, start right here… Because it only takes 10 minutes to set yourself up to make more money from the markets than you’ve ever seen in your life. I’ve never seen a simpler method for scoring fast, consistent money-doubling opportunities. A year from now, you could be looking back at this moment as the defining event of your financial future. The first step on your road to millions starts right here.
Do you own any physical gold or are you planning on buying any? Join the conversation on Twitter @moneymorning using #Gold.
