We have previously written about the problems pawnbrokers are encountering with customers trying to get cash for fake gold and with numismatic dealers who are receiving batches of fake US coins. Now it seems there are bad Krugerrands in circulation.
Krugerrands are South African gold coins, which are well-recognized and widely traded. According to South Africa’s Rand Refinery, the Krugerrand was the world’s first ounce-denominated gold coin, and has an interesting history:
“During the late 1960s and early 70s, when South Africa’s annual gold mine output averaged 75% of total output in the western world, the promotion of gold was considered vital, following the final collapse of the Gold Standard in 1971.
The chosen vehicle to drive the demand was the Krugerrand, which was developed in the 1960s by the Chamber of Mines of South Africa, working closely with the South African Reserve Bank and the South African Mint.
The Krugerrand was the world’s first ounce-denominated gold coin. Although they are legal tender, they have never recorded a face value on their obverse or reverse sides. This was done to emphasise that the value of each coin is directly related to the prevailing value of their fine gold content. They were mass produced to enable the “man in the street” to purchase gold easily and with confidence.
… Since its inception more than 50 million Krugerrands in all sizes have been minted.”
The coin’s name is a combination of the name Paul Kruger, who was a dominant military figure and president of the South African Republic in the late 1800s, and the name of the South African currency, the rand. During the 1970s and 80s, some Western countries forbade import of the Krugerrands because of their association with the apartheid government.
It’s probably all these qualities that make it quite collectible… and unfortunately, a reason for widespread counterfeiting. Recently several California pawn shops reported that customers were bringing in Krugerrands that were of decent quality, several being in plastic holders, but which were suspect. If these shop owners weren’t diligent in their testing they could have lost thousands of dollars. One shop owner was suspicious because the coloring wasn’t quite right; another said that the measurements were correct, but the details were not. One shop owner reported that the customer backed off the sale when the owner wanted to open the plastic case to analyze it more thoroughly. One person brought in several Krugerrands, some of which were real while others were not. If the pawnbroker didn’t analyze each of them, he could have lost half the money he would have paid for them.
To help combat against the widespread coin fraud, the Rand Refinery offers several tips on testing the authenticity of Krugerrands, which I have summarized in the rest of this article. We have also previously written about Numismatic Testing Methods in this article and infographic.
Size and weight are the first clues. The coins are manufactured to exact standards and the true dimensions of the coin should be checked. Knowing what the Krugerrand is supposed to look like is another visual indication. How are the fine details? Is there anything abnormal about it? In California, one shop owner thought the coins that were brought in had been harshly cleaned because there were hairline scratches on them, which is a characteristic of some of the fake coins manufactured in China. Coloring can also be a sign of counterfeiting but depending on the year they were manufactured, some of the authentic Krugerrands were more yellowish than red gold in color. Yet, one pawnbroker was suspicious because one of the coins looked ‘too yellow.’
Another clue that should draw suspicion is magnetic quality. As many precious metals collectors know, gold is not magnetic so if the coin sticks to the magnet, it is not real (although many other metals are not magnetic either so the coin could be made of a different non-magnetic material). And if the coin does not ‘ping’ when dropped on a smooth surface, then it could be fake.
Unfortunately all of these tests are based on a very skilled and knowledgeable person being able to distinguish between the subtle differences. Could you trust your workers to be so skilled that you are willing to invest a lot of money in an item that could result in lost income? On the other hand, are you willing to give up a potential sale that could bring in thousands of dollars?
There are three other tests that are more reliable than one’s hearing and eyesight. X-ray fluorescence (XRF) analyzers provide a fast, accurate, and most importantly, a nondestructive method to test the purity and composition of all precious metals. XRF quickly provides the exact karat value and weight percentage of the gold, as well as the percentages of all the precious metals and major alloying elements within an item – easily identifying non-standard, under-karated, and even advanced counterfeit material. The analyzers can even analyze encapsulated coins through the plastic protectors. This technology is widely used by retail jewelers, pawnbrokers, cash-for-gold operators, and numismatic dealers. You can see how a portable XRF precious metals analyzer works in this video.
Ultrasound testing is another method, but not many people have access to this technology. And lastly, fire assay is very reliable; however this kind of testing destroys the coin, which would adversely affect the value. You can get more details about testing methods and the correct size, thickness, dimensions and weight on this Rand Refinery web page.
The Rand Refinery promotes the Krugerrand as the world’s most widely held and actively traded gold bullion coin. Don’t be fooled by the many counterfeit ones that are circulating.