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A recent post, Collectors and Buyers Have to Be More Diligent When Buying and Selling Gold Coins, discusses the increasing incidence of counterfeit gold and silver bullion coins. Counterfeiters are becoming so skilled at replicating the weight, appearance, and strike cleanliness of real coins that high quality fakes can easily be passed off as genuine bullion products to those with untrained eyes, or to dealers without counterfeit-proofing technologies.
Bullion coins are minted from gold, silver, or platinum, and valued based on their precious metal content. Prices fluctuate daily, depending on the price of gold and silver in the world markets. With the recent high prices of gold, the volume of high quality fakes has put the reputations and livelihoods of bullion dealers at risk. The bullion coin market has also become risky for investors, who are being taken advantage of by both unscrupulous brokers and honest ones who have been duped themselves.
In Minnesota, it’s not just good business for bullion dealers to know what they’re doing when they appraise bullion coins; it’s now the law. Minnesota Senate Bill 382, which took effect in August 2013, is a response to numerous consumer complaints about counterfeit coin scams. The law calls for bullion coin dealers to disclose in writing the exact precious metal content of the coins they sell, with penalties for failing to do so, or for misleading the buyer about the composition of the coins. Dealers will also face consequences for misrepresenting their qualifications to evaluate coins, and for failing to comply with agreed upon terms of sale.
The Minnesota law is unique because it effectively requires that bullion dealers be licensed, which was previously not required in the state. The coin market isn’t highly regulated because coins are typically sold as collectibles. However, if the law proves successful, and if consumer complaints against bullion dealers in other states continue to increase, other states may follow suit. Furthermore, such coins are more often being promoted as an investment rather than collector’s items, which may eventually lead to government oversight of the bullion coin market in a manner similar to the stock and bond markets. Some dealers themselves favor more regulation in the interest of preserving the integrity of their industry.
Bullion coin dealers must have completely reliable methods to verify the coins they buy and sell. Coin dealers typically evaluate a coin based on its overall presentation, i.e., visible markings and surface condition, using simple methods such as a loupe or a ping test. Additional testing methods may include electronic gold testers (which are limited to gold and platinum identification).
To be absolutely certain of the composition of a gold or silver coin, bullion dealers should verify precious metals products utilizing multiple noninvasive, proprietary counterfeit-proofing methods including X-ray fluorescence (XRF) analyzers. XRF analyzers provide a fast, accurate, nondestructive method to test the purity and chemical composition of all precious metals.
Have you run into any fake bullion coins?
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[…] upon itself to regulate Precious Metals. And what do you know, it happens to be our home state of Minnesota. Thus, for the past three years, we have had to post a large surety bond, and have all our […]