By Mark Wachtler
February 19, 2015. Frankfurt, Germany. (ONN) For the past 15 years, a rumor of global proportions has been spread that could collapse economies, destroy countries and even start World War 3. Since the Clinton administration, some have speculated that the US government replaced some portion of the nation’s gold stored at Fort Knox with gold-plated tungsten bars, comparatively worthless. The rumor grew to include the gold owned and stored by other nations in the US, most especially Germany. German officials just reclaimed some of their gold, tested it and confirmed they were all pure gold.
Rumors of counterfeit gold bars aren’t rumors but fact. The question is, how widespread is the problem and who’s been victimized. Image courtesy of BullionStacker.com.
2010 - the story begins
While the rumor of counterfeit gold bars filling America’s vaults has been around since the mid-1990’s, it wasn’t until 2010 that reputable sources, including licensed precious metals dealers and global banks, began confirming that counterfeit gold-plated tungsten bars had in fact infiltrated the highly regulated international gold market.
As detailed by CoinUpdate.com in a 2010 report, four counterfeit gold bars had been received by the Chinese central bank from the United States. Chinese officials didn’t publicly confirm that rumor, at least that we could find. But at the same time, a German TV news network broadcast a story from a reputable German gold foundry. The smelting plant’s 30-year owner told the news outlet how one of his workers pointed to one of the gold bars the foundry regularly receives. He insisted something wasn’t right about it.
The owner explained that he trusted his longtime employee’s gut instinct and they cut the bar in half. They were shocked to find the bar filled with worthless tungsten instead of pure gold. “The old fox was right,” the owner said after their horrifying discovery. Watch the German telecast via YouTube. The foundry’s owner went on to explain that it wasn’t he who was defrauded, but a German bank that purchased the gold and sent it to the foundry to be melted down and minted into larger bars for storage.
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Debunking the debunkers
With a sudden whirlwind of near-panic over the possibility that the world’s gold could really be worthless tungsten plated with a thin layer of gold, a handful of individuals attempted to discredit the story. They couldn’t. One attempt came from The Market Oracle in the UK that claimed the news about gold-plated tungsten bars was a lie. They called it the, ‘Fake Gold Plated Tungsten Story’.
But upon reading their argument as to why they feel the stories are ‘fake’, the author actually admitted that the stories are fact. Their flawed reasoning being that the gold-plated tungsten bars sent to China from the US were giant 400-ounce bars. And the much smaller counterfeit gold bars found in Germany were only 500-gram bars. Therefore, since the counterfeiting involved two different sized bars, both stories had to be fake.
Counterfeit gold bars found in New York
Jump two years to 2012 and another high profile case of counterfeit gold-plated tungsten bars being discovered among the world’s most reputable gold dealers. This time the scene was New York City’s diamond district in Manhattan. There, a registered, licensed New York gold dealer acquired four ten-ounce pure gold bars for roughly $100,000.
The store owner says he was recently told about the counterfeit gold rumors by a friend and he decided to test his own gold himself. He placed one of the bars under a drill press and drilled a hole in the soft metal. He was shocked to see the bar was nothing more than a block of gray metal with a thin foil-like wrapper of gold around it. It was another counterfeit gold bar.
“I got sick,” the man told the local Fox News affiliate when he discovered he’d been sold counterfeit gold, “It’s a big amount of money.” The New York branch of the Swiss bank that sold the fake gold bars says it reported the incident to the FBI. The news account went on to confirm that counterfeit gold bars were also discovered in the UK. In the British case, the thieves drilled numerous tunnels through each gold bar, kept the gold shavings and filled the spaces with tungsten.
In the NY incident, the perpetrators were much more sophisticated. They acquired registered gold bars, complete with serial numbers stamped on them. They then plated tungsten bars of the exact same shape and weight with a thin layer of gold and re-stamped them with the original logo and serial number. It’s that last aspect that is putting fear into many central banks. The counterfeit gold bars in both Germany and the US came from official foundries and banks - the same foundries and banks that central banks get their gold from.
Germany tests its US gold
Flash forward to last month when Yahoo News and AFP reported that Germany has not only increased its repatriation of gold from the US back to Germany, but it tested the last shipment from America to insure it wasn’t counterfeit. “The Bundesbank successfully continued and further stepped up its transfers of gold,” the German central bank said in a statement, “In 2014, 120 tons of gold were transferred to Frankfurt from storage locations abroad: 35 tons from Paris and 85 tons from New York.”
The report credits Germany with having the second-largest national reserve of gold in the world, behind only the United States. Germany owns 3,384 tons of gold and stores it in Western countries for safe keeping, a tradition that began after World War 2 and continued through the Cold War when half of Germany was occupied by the Soviet Union.
Currently, of Germany’s gold stored in other countries, 1,447 tons are at the Federal Reserve Bank of New York. 438 tons are at the Bank of England. And 307 tons are stored at the French Central Bank in Paris. According to German plans, the country intends to bring home 674 tons of gold by 2020 and settle with half stored inside Germany and the other half still kept in foreign countries.
Upon receipt of another shipment of gold from the US, German officials casually mentioned that they inspected the gold to insure it wasn’t counterfeit. “Implementation of our new gold storage plan is proceeding smoothly. Operations are running very much according to schedule,” Bundesbank’s Carl-Ludwig Thiele announced, “We also called on the expertise of the Bank for International Settlements for the spot checks that had to be carried out. As expected, there were no irregularities.”