The subprime bubble and 2008 near financial meltdown were partially caused by people’s unwillingness to “look under the cover” as immortalized in the recent Hollywood hit “Big Short”.
By 2007 so called “No Income, No Job, No Assets” mortgages (NINJA loans) had become common and some banks even skipped doing basic due diligence on borrowers in exchange for higher interest rates (SISA loans). At its crescendo even pets could own 4 room houses as their owners took out mortgages in the pet’s name, pretending they were people with jobs, using such SISA loans.
While banks were buying, selling and re-packaging worthless mortgages, debt rating agencies mostly ignored the obvious fraud as the industry was swimming in profits. So many smart people worked in the industry yet very few had an interest, the morals or the intellect to really look under the covers until it all fell apart.
It is tempting to ignore unpleasant truths, but the lesson from 2008 should be to verify matters yourself. If you own physical gold or silver as your failsafe store of wealth it is prudent to “look under the cover” so that you know, not assume, that it is indeed genuine gold or silver.
To address these concerns in 2012 we developed DUX to reliably test and identify advanced bullion counterfeits using, among other tools, ECM and Ultrasound probes. DUX however requires trained personnel, custom software, specialized equipment licenses and very expensive testing tools to operate, it is neither easy nor convenient to set up and to do.
Advanced bullion counterfeits, which are not obvious to even seasoned buyers, can be well packaged bars or coins that mimic the real product very closely and partially rely on a retail customer’s reluctance to “open the packaging” or be “debased bars” whereby real gold bars have been skilfully filled with tungsten cores, making them very difficult to detect by traditional means.
An advanced counterfeit 10 oz gold bar valued around 12,500 USD discovered in Manhattan
Notice how the center is black tungsten surrounded by a peeled layer of real gold to pass x-ray, acid and density tests.
Such advanced counterfeit bullion is often designed to thwart traditional testing tools such as weighing scales, acid, or densometers and to be sold into legitimate commerce via unsuspecting individuals, retail bullion dealers, pawnshops or jewellers.
The sophistication of such credible counterfeits is increasing and the number of advanced fakes in the secondary market is anybody’s guess. So it is unclear how widespread the problem is and whether it will worsen.
So I was intrigued when we came across a revolutionary new personal precious metal verifier (PMV for short) which promised reliability, ease of use and modest costs for “do-it-yourself” use. We tested the device for three weeks in our testing lab and found the device to correctly identify all high-end fake tests we threw at it.
The PMV probes the inside of a bar or coin using a highly tuned proprietary variation of Electrical Conductivity Measurements (ECM) which can reliably detect inserts and impurities, even behind a layer of real gold or silver. The PMV can even probe through most bullion packaging such as plastic coin holders or plastic packaging without breaking the packaging.
The full PMV set uses three type of probes, with each being optimized for certain test sample thickness, a coin example would be placed on the PMV directly while a 10 oz bar would require the dedicated bullion probe. Knowing which probe to use is the only real learning requirement for the user in its otherwise very simple operation.
I am impressed and believe that, once mass produced, these new generation testers can drastically reduce the spread of counterfeit bullion worldwide by being a strong deterrent to potential counterfeiters. The PMV is a tool that empowers private individuals and enables the industry at large to easily “look under the cover”. The tool's mere existence makes the industry safer in a way that the financial rating agencies have failed so spectacularly at with their Collateralized Debt Obligations (CTO) ratings.
With so many worthless mortgages still on bank balance sheets, record sovereign debts, and a global economy seemingly addicted to near zero interest rates and limitless money printing the very future of our current financial system will be challenged. Ownership of physical gold and silver are a great way to protect your wealth in a crisis, and reliable Do-It-Yourself testing will make it even more so.
By Gregor Gregersen