Tungsten Salted Gold - Investment scam of the century???

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Erik T.'s picture
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Tungsten Salted Gold - Investment scam of the century???

ATTENTION GOLD INVESTORS! If you missed this on the Nov. 13 daily digest, I implore you to go read this article in its entirety right now:

Gold Finger - A New Take On Operation Grand Slam With A Tungsten Twist (h/t PineCarr)

The quoted text on the daily digest was the first paragraph of the article, but really didn't reveal the extent of what is alleged by the article. I'm using the word alleged quite intentionally, because I feel that this article is alluding to a lot of possibilities that are speculative and unproven. But there's also some hard facts that I verified myself about the GLD ETF here that no investor in GLD can afford not to know about.

It's already been widely reported that a 400oz gold bar was found gutted out and filled with Tungsten. This sounded at first like it could be an isolated incident, but this article now claims this is much bigger than I previously understood:

Quote:

The amount of “salted tungsten” gold bars in question was allegedly between 5,600 and 5,700 – 400 oz – good delivery bars [roughly 60 metric tonnes].

But the real news (which I feel compelled to emphasize that I was unable to verify) is this shocking information:

Quote:

Roughly 15 years ago – during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day. I know folks who have copies of the original shipping docs with dates and exact weights of “tungsten” bars shipped to Ft. Knox.

The balance of this 1.3 million – 1.5 million 400 oz tungsten cache was also plated and then allegedly “sold” into the international market.

Apparently, the global market is literally “stuffed full of 400 oz salted bars”.

That is the most amazing "news" story I've ever read! If this is really true, the consequences of this being revealed publicly could defy comprehension. A couple of years ago I would have dismissed this a lunatic conspiracy theory nonsense just because the claim is so absurd - that the U.S. Goverment defrauded the world by selling fake gold bars from Ft. Knox. But based on what we've seen from government in the last few years, I'm ready to believe just about anything. I wish I knew where to go to verify these claims.

For investors in the GLD ETF, this quote from the prospectus was rather shocking:

Quote:

Gold bars allocated to the Trust in connection with the creation of a Basket may not meet the London Good Delivery Standards and, if a Basket is issued against such gold, the Trust may suffer a loss. Neither the Trustee nor the Custodian independently confirms the fineness of the gold bars allocated to the Trust in connection with the creation of a Basket. The gold bars allocated to the Trust by the Custodian may be different from the reported fineness or weight required by the LBMA’s standards for gold bars delivered in settlement of a gold trade, or the London Good Delivery Standards, the standards required by the Trust. If the Trustee nevertheless issues a Basket against such gold, and if the Custodian fails to satisfy its obligation to credit the Trust the amount of any deficiency, the Trust may suffer a loss.

The article goes on to speculate quite a bit about how the ETF itself might have been set up as some sort of conspiracy to create a place to get rid of all the phony gold bars. I'm not inclined to pay much heed to that stuff, but this quote from the GLD prospectus is pretty damning in my eyes just by itself. The Gold in GLD may not meet Good Delivery standards??? What standards does it meet, then?

So what if all this counterfeit business were actually true, and many of the 400oz gold bars in the world are fakes? Seems to me like the value of the real stuff (if you can prove it) would go through the roof, while the value of paper gold assets including GLD ETF shares and COMEX gold contracts would fall precipitously because of a loss of investor confidence in whether there is real gold behind the paper. A counter-argument would be that the standard unit of exchange on the COMEX is 100oz bars, which would presumably be a little harder to salt with Tungsten than the 400oz variety. (Kevin Maher, any opinion on this?)

I am heavily invested in COMEX gold futures and scared to death by what this could mean. I'm tempted to move out of Gold and into an equivalent dollar amount of Silver (figuring it is a good proxy for Gold appreciation) until the question of widespread tungsten salting is either credibly refuted or confirmed and the extent of impact is understood. But if this counterfeit gold business were actually true, it could take down the entire exchange and make all COMEX (and perhaps all NYMEX) contracts worthless!

Anyone know more?

Erik

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Re: Tungsten Salted Gold - Investment scam of the century???

The world is, without a doubt, an insane asylum. AAA ratings and now these rumors all while a counterfeiter goes berserk.

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Re: Tungsten Salted Gold - Investment scam of the century???

Erik,

At this point I don't know what to believe about our government. It would seem that these stories are gaining more credibiltiy.

However, on the other hand it recently occured to me that suppose this information is actually "disinformation" planted by tptb to cast doubt on gold investments and indirectly make people want FIAT money and not gold.

In the mean time I think I may buy some more gold coins.

Keep the information coming.

Ken

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Re: Tungsten Salted Gold - Investment scam of the century???

The story seems so fantastical that it couldn't possibly be true.  But these days, almost nothing would surprise me.  I'm just glad my gold is in coin form.

Viva -- Sager

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Re: Tungsten Salted Gold - Investment scam of the century???

Hey KenC-

  You know, I had the same thought re the other possibility being that this could be disinformation.  I've become so jaded about trusting any stories in the media, that it is becoming 2nd habit to ask "what could be the outcome of this news?" and then "who would benefit from that?" (i.e., who would have a motive to propogate that news). 

  So while I find this story incredibly interesting, much of it is, as Erik states, speculative.  But with all we've learned the last year or so, I don't dismiss it out of hand, either!  So I'm left pondering wheter it is:

- Fiction ("passively" not-true, as in someone unintentionally promoting something that is not true, because it aligns with their own beliefs or opinions),

- Misinformation ("actively" not-true; someone knowingly and intentionally promtoting an untruth to manipulate the market), or

- True (the "investment scan of the century").

  So even though it is speculation, I still sent the article  to family members invested in  GLD so they'd have this information about the potential additional risk of their position. They can decide what to do with that information

  Erik, I also found the timing noted in the article very interesting (but you're right, it is speculation)  Here's the clip:

These revelations should provide a “new filter” through which Rothschild exiting the gold market back in 2004 begins to make a little more sense:

“LONDON, April 14, 2004 (Reuters) - NM Rothschild & Sons Ltd., the London-based unit of investment bank Rothschild [ROT.UL], will withdraw from trading commodities, including gold, in London as it reviews its operations, it said on Wednesday.”

Interestingly, GATA’s Bill Murphy speculated about this back in 2004;

“Why is Rothschild leaving the gold business at this time my colleagues and I conjectured today? Just a guess on my part, but suspect:”

*SOMETHING IS AMISS. THEY KNOW A BIG GOLD SCANDAL IS COMING AND THEY WANT NO PART OF IT. …”

“ROTHSCHILD WANTS OUT BEFORE THE PROVERBIAL "S" HITS THE FAN.” BILL MURPHY, LEMETROPOLE, 4-18-2004

Coincidentally [or perhaps, not?], GLD Began Trading 11/12/2004

-pinecarr

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Re: Tungsten Salted Gold - Investment scam of the century???

I've been following this story but I am unable to offer any concrete evidence to support or refute these "salting" allegations.  Fort Knox is a mystery that should not be.  In a lawful society, the stored gold would be periodically counted and spot assayed.

Here are some other concerns regarding the integrity of the gold markets:

  1. The U.S. is apparantely missing gold - (see my earlier post - U.S. Gold, Going or Completely Gone?)

    The United States Geological Survey [USGS] publishes monthly Mineral Industry Surveys designed to provide a macro-import/export-overview of the U.S. precious metals [gold] industry.  Over the course of 2007 / 2008 more than 5,000 metric tonnes of "Gold Compounds" have been exported from the United States of America representing more than 62 % of reported sovereign U.S. gold reserves."  The sovereign U.S. gold reserve has not been independently audited since the 1950's during the Eisenhower Administration. GATA's freedom of information requests are all about ensuring that the 8,100 metric tonnes of U.S. sovereign gold is still owned by the U.S. In April, 2008 the Federal Reserve responded to GATA's request, releasing hundreds of pages of worthless information with significant portions redacted."

    If this is true, over 5,000 metric tonnes of gold are missing which would leave us with at most, 3,100 tonnes of gold.  At $1,100 per troy onuce, the theft would represent around $180 billion dollars.

  2. Physical Bullion Inventory Shortage; there are signs of increasing physical bullion liquidity problems at major trading exchanges such as the Comex and the LME, as evidenced by 'significant lumpy transactions', increasing price volatility, the reemergence of non-LBMA-purity coin melt bars and generous 25% premium cash settlement offers to futures contract holders rather than physical deliveries (Kirby, Willie). Also there have been requests for repatriation of offshore sovereign reserves. Germany and Switzerland are reportedly demanding the return of their custodial gold from the U.S. plus Hong Kong and Dubai are also planning to withdraw their bullion holdings from UK depositories.
  3. Growing Suspicion of ETFs; closer inspection of the GLD and SLV ETF Prospectus' show incongruencies pointing towards the conclusion that the paper shares may not be fully backed by physical gold or silver (Kim, Mayer). Some even point to these funds being derivative paper trading tools complicit in the ongoing physical bullion price suppression. It is interesting to note that some custodians of the ETFs are also some of the main holders of substantial market short positions. Greenlight Capital has notably sold $500 million of the GLD ETF and bought physical bullion although they downplay the risk angle and attribute the action to fee cost savings.  (Complete article link - Silver Bear Cafe)
  4. Double Allocation of Physical Gold; Adrian Douglas in 'How much imaginary gold has been sold?' (Part1, Part2) argues that the volume of gold traded on the London bullion exchange could not be supported by the reported sales of 15,000 tons (482 million ounces). By Douglas' calculations, the London market needed a minimum of 64,000 tons (2.05 billion ounces) of gold to be sold to support its reported trading volume. He believes that any disclosure that this much extra gold has been sneaked onto the market, leaving less inventory available to cover open contracts in London, could cause a panic in the gold market. Is the London bullion market operating on a fractional-reserve basis with 64,000 tonnes of gold sold via unallocated accounts against a maximum reserve of only 15,000 tonnes? If he is correct then some vaults hold bullion bars with multiple allocations. Douglas estimates that paper gold derivatives dwarf physical bullion by at least 20-1.  (Complete article link - Silver Bear Cafe)  
  5. Double Allocation of Physical Silver; it seems that there may be also problems in the silver ETFs. ZeroHedge analyzed SLVs bar list and found that during their research into the inventory lists of the iShares SLV and London-based ETFS physical silver funds, there were discovered multiple anomalies which cannot be easily dismissed. These included the presence of internal duplicates, rough internal duplicates, weight duplicates, statistical clustering, and cross-reference duplicates (ZeroHedge). Jason Hommel estimates silver paper derivatives dwarf physical bullion by around 100-1.
  6. ETF Proxy Settlement; New York and Tokyo commodity exchanges permit their gold futures contracts to be settled not in real bullion but in shares of gold ETFs. This essentially allows the gold shorts (and the exchanges themselves, which guarantee futures contracts) to transfer their obligations to third parties that may not have the metal they claim to have. It is now apparently legal for precious metals futures contracts to be settled by delivery of paper ETF shares rather than physical bullion (The Alchemists).

"Basically, the gold market operates on a fractional reserve basis. On average there are several claims of ownership on each gold bar conforming to London Good Delivery (LGD) standard on the "pool" of gold which acts as liquidity for the massive OTC gold trade based in London. Similarly, there are several claims of ownership on the gold bars in Comex wherehouses [sic]. If a sufficient number of market participants become concerned about this (which is happening) and there is a stampede to take delivery of physical bullion, the entire gold market will come crashing down, taking most of the global financial system with it. Market failure isn't a risk, it is a certainty. The unregulated gold market is an accident waiting to happen." (Gold Market Reaching The Breaking Point)

Larry

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Re: Tungsten Salted Gold - Investment scam of the century???

Wow!  Larry great post!!!!!  Thank you very much!  I'm going to buy some more gold on Monday;-)    Coins btw.

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Re: Tungsten Salted Gold - Investment scam of the century???

Thanks for the excellent info, Larry!

This was the first I'd heard of futures exchanges authorizing settlement thru ETF shares.That unto itself seems like a scam and a half. So if I am due 100oz of bullion against my COMEX futures contract, how many shares of GLD do I get instead? There is "supposedly" 1/10oz of gold behind each share, so one would assume I would get 1000 shares. But 100oz of real bullion is worth $112,000 and because of "tracking error", 1000 shares of GLD sells for only $109,750 or so. If it's really legal to settle short futures contracts with ETF shares, it would appear to create a risk-free arbitrage! And the prospectus for the ETF says clearly that the gold it holds may NOT meet good delivery standards of the futures exchanges!!!

I left a message on the "Q-Line" asking Jim Puplava to comment on this article personally. Hopefully he'll do so on next week's show.

Larry (or others), any opinion or background information on issues with Perth Mint bullion ownership - either the certificate program or allocated bars? I had been leaning toward physical delivery of bullion to put in a safe deposit box, but after reading this I realize that the risk of counterparty default in paper gold is no greater than the risk of being sold fake gold bars by a futures exchange.

Thanks,

Erik

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Re: Tungsten Salted Gold - Investment scam of the century???

Erik,

Don't know if this helps but I own allocated PM's in the Perth Program and have taken physical delivery from them in the past.  I've checked every piece with my spectrometer and found nothing improper.  It's a very easy program to be involved and their customer service is outstanding.  Now I will say they've become a little more strict in the past year over taking physical (more lead time needed before physical delivery) but they're MUCH easier to deal with than CONEX!  I've sat at the CONEX facility for HOURS waiting for delivery!  And I honestly feel like I'm being followed every time I leave as they usually have a couple guys in suits outside with they ear pieces watching me drive away.  Very eerie.

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Re: Tungsten Salted Gold - Investment scam of the century???

Wouldn't it be really funny if the gold that the US funded the World Bank with was Tungsten core?  You know Roosevelt did the same scam back in the 30s when he confiscated our gold coins to settle our European debt with 90 percent gold.  Tungsten is even more profitable than that!

I'm dripping sarcasm, sorry if many of you can't tell.

Doc

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Re: Tungsten Salted Gold - Investment scam of the century???

LogansRun,

I'm actually surprised that you took delivery at COMEX yourself (i.e. without using a brinks' truck or similar service). Seems to me like it would be pretty easy for a criminal to figure out that a guy like you who goes in, waits for them to go slowly, then walks out must be carrying at least one 100oz bar. I'd be incredibly paranoid about someone tailing me and robbing me if I took delivery in person there.

Erik

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Re: Tungsten Salted Gold - Investment scam of the century???

So when this blows up, everybody and their dog will want to dump their gold and the prices will plummet? When will prices skyrocket after that due to scarcity? 

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Re: Tungsten Salted Gold - Investment scam of the century???

I work professionally in the bullion industry with Anglo Far-East Bullion Company dealing with LBMA "Good Delivery Bars" daily.

My thoughts on the tungsten story are here:

http://www.rapidtrends.com/2009/11/14/why-gold-bugs-are-considered-nuts/

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Re: Tungsten Salted Gold - Investment scam of the century???

Erik,

It wasn't a problem at all.  I had my father (Force Recon/Marines), Brother ( ex-SEAL) and Brother in Law (ex-SEAL) with me.  Brother Driving me with the other two behind in vehicle.  You get walked out of the CONEX by armed persons (to the door).  Everyone was armed other than myself until I got into the vehicle.  Both times I walked out without a hitch and wasn't nervous AT ALL.  Like I said, the employees of the facility made me more nervous than walking out.  

BTW:  Have you ever been there?  You sit in a location that's not available to the general public so unless there's a phone call from an employee (which could happen) then there's really no way for someone to case you out.  Also, you don't just walk out the front doorWink

You should try it sometime.  It's a rush to walk out of a place with a couple bars of Golden HappinessLaughing

Taking possession of Silver is pretty much the same but I had to have a larger vehicle.  

Also, trying to find places to put this stuff is a pain in the butt too.  I don't keep hardly ANY on premise of my home so allocating it to different locations can be stressful.

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Re: Tungsten Salted Gold - Investment scam of the century???

...And here's another perspective on the Rob Kirby article from FOFOA, at http://fofoa.blogspot.com/2009/11/is-dollar-good-as-tungsten.html .  Here are a couple paragraphs early on in the article:

The Tungsten Story

I'm not going to say too much about this story yet because I am still skeptical. I'm not skeptical because it doesn't fit the context that we know. On the contrary, it almost fits too perfectly. But this, I think, is my main point in this post. What is most important as we observe this unfolding story is our clear understanding of the context that surrounds it.

We live today in a world of rampant fraud and misinformation. Not much is surprising. In fact, I fully expect some surprises which will DWARF this tungsten story. But still, so far this story relies on the credibility of only one analyst who has uncovered, and/or been given, some incredible information. If the story is true, then we will soon receive corroborating stories from other sources for reasons that I will discuss in a moment.

But don't assume FOFOA's article only covers the skeptic-angle.  He goes on, under "On the other hand..." to lay out some really interesting stuff.  Here's an excerpt:

"On The Other Hand

On the other hand, like I said at the beginning of this post, the Kirby story fits the known gold manipulation paradigm perfectly. Let's have a quick review.

In his article, Rob Kirby says:

And here’s what the Chinese allegedly uncovered:

Roughly 15 years ago – during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day.

The mention of Rubin, Greenspan and Summers especially caught my eye. It tells me that Rob is thinking the same as me if this story is really true. For the sake of this quick run-through, let's imagine the tungsten bar story is true.

If so, this epic journey of stupidity by these three men began way back at the beginning of the Great Depression in 1930 when John Maynard Keynes wrote in his "A Treatise on Money" that interest rates and general price levels (infation) were observed to be correlated. Keynes called this Gibson's Paradox.

John Maynard Keynes

58 years later, in 1988, while at Harvard University Larry Summers published a paper called Gibson's Paradox and the Gold Standard. In the paper he theorized that government bonds could be made valuable by manipulating the price of gold downward. GATA summarizes it like this:

"Essentially, the scheme as implied by Summers' paper is to keep interest rates down and government bond prices up by rigging the gold market, gold and interest rates ordinarily being inversely correlated...."

 The additional context provided by FOFOA makes speculating on the truth of Kirby's story more and more interesting. 

  But Kirby's story would certainly be more credible if there was more substantive evidence to support it, available to the rest of us.

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Re: Tungsten Salted Gold - Investment scam of the century???

As I mentioned in my earlier post it is certainly possible that this whole story is just disinformation. I will withhold judgement until more verifiable data is provided.

One would think that if there are so many of these tungsten bars floating around that someone by now would have produced at least one for display to the media.

Ken

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Re: Tungsten Salted Gold - Investment scam of the century???

How much would a 400 ounce gold plated bar weigh if it started out as a 400 ounce tungsten bar???

And here’s what the Chinese allegedly uncovered:

Roughly 15 years ago – during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day.

Maybe the Chinese want to lower the price of Gold with misinformation to jump in at a lower price.

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Re: Tungsten Salted Gold - Investment scam of the century???

idoctor wrote:

How much would a 400 ounce gold plated bar weigh if it started out as a 400 ounce tungsten bar???

And here’s what the Chinese allegedly uncovered:

Roughly 15 years ago – during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day.

Maybe the Chinese want to lower the price of Gold with misinformation to jump in at a lower price.

A good delivery bar must weigh between 350 and 430 OZT.

Here is a link to the LBMA good delivery bar definition.

http://www.lbma.org.uk/delivery/definitn

Ken

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Re: Tungsten Salted Gold - Investment scam of the century???

Interesting story.

From the US Mint:

Quote:
The United States Bullion Depository Fort Knox, Kentucky
  • Amount of present gold holdings:  147.3 million ounces.
  • The only gold removed has been very small quantities used to test the purity of gold during regularly scheduled audits.  Except for these samples, no gold has been transferred to or from the Depository for many years.
  • The gold is held as an asset of the United States at book value of $42.22 per ounce.
  • The Depository opened in 1937; the first gold was moved to the depository in January that year.
  • Highest gold holdings this century:  649.6 million ounces (December 31, 1941).
  • Size of a standard gold bar:  7 inches x 3 and 5/8 inches x 1 and 3/4 inches.
  • Weight of a standard gold bar:  approximately 400 ounces or 27.5 pounds.
  • Construction of the depository:
    Building materials used included 16,000 cubic feet of granite, 4,200 cubic yards of concrete, 750 tons of reinforcing steel, and 670 tons of structural steel.
    The cost of construction was $560,000 and the building was completed in December 1936.
  • In the past, the Depository has stored the Declaration of Independence, the U.S. Constitution, the Articles of Confederation, Lincoln's Gettysburg address, three volumes of the Gutenberg Bible, and Lincoln's second inaugural address.
  • In addition to gold bullion, the Mint has stored valuable items for other government agencies.  The Magna Carta was once stored there.  The crown, sword, scepter, orb, and cape of St. Stephen, King of Hungary also were stored at the Depository, before being returned to the government of Hungary in 1978.
  • The Depository is a classified facility.  No visitors are permitted, and no exceptions are made.
http://www.usmint.gov/about_the_mint/fun_facts/index.cfm?action=fun_facts13

So 147.3m oz would mean 368,250 400oz bars - a little more than 1/2 the 640k tungsten plated bars said to have been stored there. The 650m oz said to have been stored there in 1941 would occupy a space ~10'x20'x50' - not so large really.

This site:

comes up in the searches about the subject and China has about 75% of the known ore deposits. From a 2005 article:

Quote:

The wildcard in terms of tungsten pricing has always been the Chinese who control roughly 75% of the world’s reserves in the metal, and supply about 85% of world consumption, currently running roughly 50 thousand tonnes per annum.  The Chinese and to some extent the Russians have pushed the price down in the past by flooding the market with cheap tungsten.

On that front, however, things appear to have turned a corner.  The Chinese are no longer exporting tungsten, but are focusing on finished product tungsten goods.  Also, China recently took measures to curb tungsten exports in order to boost supply inside the country.  Reuters recently reported that the Chinese need to keep more of the metal to make cemented carbide, a hard material for cutting tools.

Further, a crackdown on illegal private mines is underway and it is believed that Minmetal, the large Chinese conglomerate that recently took a run at Noranda, is consolidating tungsten mines and now controls something in the order of 70% of tungsten production in the country.

All of this adds up to what some analysts believe is a supply shortfall of around 7,000t by 2007 that will most likely have to be met outside of the PRC, even if it is to be fed back into the maw of that economic juggernaut.  Presently, there are few major tungsten mines in the free world with the majority of production coming from Canada, Portugal, Austria, Bolivia, and Russia; depending on your definition of ‘free’.

http://www.resourceinvestor.com/News/2005/5/Pages/Tungsten-Price-Goes-Parabolic.aspx

So the innovative Chinese could certainly be a source of this kind of special product - not that they have any direct relation to the story at hand.

A thicker plating of gold could defeat a cursory check of such a product, but I would think that someone with familiarity with the real stuff wouldn't be fooled by this type of scam  - I am guessing that the feel and 'sound' of the fakes would be somewhat different since gold is so much softer than tungsten.

This kind of fake would seem to be ideally suited for making a large gold holding appear to be in order for inventory purposes when in fact a good percentage might be made up of fake bars...

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Re: Tungsten Salted Gold - Investment scam of the century???

I'm now at least 95% convinced that the Kirby article is pure nonsense, but 5% is still a very big number when most of your assets are invested in gold, so I'm still very curious to get to the bottom of this.

Kirby's statements don't add up. First he describes what "Chinese authorities" have "allegedly uncovered". Ok, fair enough. But then he goes on to say that he personally knows people who have "seen the shipping documents". That just doesn't jibe.

But that said, I'm not ready to write this off completely yet. One of the disinformation tactics used by governments is to plant people who intentionally exaggerate the truth so much that it becomes unbelievable. This business Kirby is reporting about how 1.5 million 400oz tungsten bars may have been sold into the market just isn't credible, IMHO. But if one were trying to cover up a TRUE story about 1,500 such bars, exaggerating the story to 1.5mm bars is a plausible way to discredit what might otherwise have been a legitimate concern.

Does anyone have any HARD DATA about ANY tungsten bar being found here in Hong Kong? I've heard the rumor from quite a few sources now, but I've yet to see a news story evidencing a formal official acknowledgment that ANY tungsten bars have actually been discovered.

Thanks,

Erik

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Re: Tungsten Salted Gold - Investment scam of the century???

ErikTownsend wrote:

Does anyone have any HARD DATA about ANY tungsten bar being found here in Hong Kong? I've heard the rumor from quite a few sources now, but I've yet to see a news story evidencing a formal official acknowledgment that ANY tungsten bars have actually been discovered.

Thanks,

Erik

You are from Hong Kong?  Do you really believe the Chinese government would admit they were taken by a scam? Hope this helps.Wink

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Re: Tungsten Salted Gold - Investment scam of the century???

Actually I've only lived in HK for 2 1/2 months now. But still, the wisdom of your statement is easily confirmed by my experience here, short as it's been. :-)

Erik

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joemanc
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Re: Tungsten Salted Gold - Investment scam of the century???

One thing is for certain...GOLD and everything about it is always wrapped up in some type of possible conspiracy. Sigh

Unix Ronin's picture
Unix Ronin
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Re: Tungsten Salted Gold - Investment scam of the century???

The story is alarming, but it fails elementary tests of reason. Just do the math. This (naturally, unnamed) "high quality refiner" is alleged to have produced "1.3 to 1.5 million" counterfeit 400oz-Troy gold bars, which, by simple math, have a current market value of around US$677 billion. Half of that gold is alleged to have been shipped to Fort Knox.

What's wrong with this picture? Well ... the problem with this is, if you do the math, that's roughly 1.25 times the total US gold reserves. The ENTIRE CONTENTS of Fort Knox would have had to have been replaced with counterfeit bars without anyone noticing. It's not plausible.

My call on this: I'm guessing the counterfeit bars found in Hong Kong came out of China (the speculative amount would represent 6.7% of China's gold reserves, which is entirely plausible); China is pointing the finger at the US in an attempt to shift the blame at a past administration that it believes there's a good chance conspiracy theorists worldwide will go for; and from there on, the "high quality refiner/Fort Knox/Clinton/Greenspan" story is pure tinfoil-hattery.

Let's face it: Is this the FIRST time we've heard a conspiracy theory that all the gold in Fort Knox has been secretly removed or replaced with fakes by the Bavarian Illuminati or the New World Order? Is it the fifth? Is it even the tenth? It's right up there with captured aliens being held at Area 51 and Hitler being alive and well in Argentina.

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Erik T.
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Re: Tungsten Salted Gold - Investment scam of the century???

I've been scouring the net for more on this story, and after reading many different sources, I'm convinced that at least 90% of the Kirby story is BS. Important caveat: 10% reality would still be a very scary scenario.

Here's what I think happened: The Chinese Gov't found the Chinese criminals responsible for the Hong Kong fiasco and has probably already dealt with them using the Chinese "justice" system we hear so much about. But then the Chinese government found itself in a double-pickle: They already needed to increase their gold reserves, and they probably got egg on their face by negotiating too aggressively with IMF for the gold it has for sale. They were recently upstaged by the Indian central bank who beat them to half of the 400t that IMF wants to sell. So that leaves China hurting for more reserves in a rapidly appreciating market and a diminished negotiating position. Then to add insult to injury, they learn that thanks to Chinese counterfeiters, about 6% of the reserves they thought they had turned out to be bogus. That makes them even more anxious to figure out how to buy more gold, without running the price up too much.

What would you do in that situation? My speculative hypothesis is that the Chinese decided to try to make the best of their embarassing situation by spreading disinformation that would put fear into the market worldwide, for the express purpose of not letting the price appreciation get out of hand while they were quietly negotiating with IMF for the other 200t that is for sale. What better way to spook the market than to scare everyone with doubts about what gold is real and what gold is fake? That tactic clearly won't have a lasting effect, and they knew that. But it would last long enough for them to negotiate for the other half of the IMF gold.

Think about it... If the Chinese Gov't were buying up gold behind the scenes while the tungsten scare was holding the price down, you would expect just about exactly the price and volatility action we've seen in the last week or so.

This is all pure speculation on my part, but it makes a lot more sense to me than Kirby's claims that half the gold in the world is really tungsten.

Erik

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DrKrbyLuv
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Re: Tungsten Salted Gold - Investment scam of the century???

Hello Erik,

Join the club - I've been looking too and have been unable to verify Kirby's claims.  If we're left with speculation, I think your hypothesis makes a lot of sense.  Kirby may have been fed some bogus info by sources he thought were "credible."

An intended or unintended consequence of this story may be for big gold holders to start to demand independent audits and to spot assay at least some of their gold.  In the U.S. for example, will citizens start to demand that the Fort Knox and West Point vaults be audited?  What about Comex?  Could this be a warning shot over the bow? 

According to Casey research, China is the largest gold producer.  I think it would benefit China to have increased credibility in the gold market.  Price suppresion and scams may undermine a market that seem very commited to grow.  These charts from Casey Research:

The chart above shows the amount of gold reported to the World Gold Council as of September 2009.  As I mentioned earlier, it appears that the U.S. may only have a max of around 3,100 metric tonnes of gold. 

"The United States Geological Survey [USGS] publishes monthly Mineral Industry Surveys designed to provide a macro-import/export-overview of the U.S. precious metals [gold] industry.  Over the course of 2007 / 2008 more than 5,000 metric tonnes of "Gold Compounds" have been exported from the United States of America representing more than 62 % of reported sovereign U.S. gold reserves."

Maybe someone can explain why the USGA's report was not reflected in the most recent reports to the World Gold Council?  Is the gold missing?  Could China be warning others to clean up their act when it comes to gold?

Larry 

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Cloudfire
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Posts: 1813
Re: Tungsten Salted Gold - Investment scam of the century???

First, thanks, Erik, for bringing this to the fore . . . I usually skim over these sorts of posts in the DD.

Second, of course, I can shed no light on the validity of this . . . there are a lot of unattributed sources in the rumor.

Third, I agree that 5% is a very big number if you're heavily weighted in gold.  Perhaps the most important message in this is the vulnerability that any heavy weighting in a commodity can manifest . . .

Wealth is a pain in the behind, isn't it? . . . I buy things that I can understand and verify.  I won't get rich doing it, but I won't get blindsided, either . . .

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rapidtrends
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Re: Tungsten Salted Gold - Investment scam of the century???

Possible answer as to why China didnt buy when India did:

http://in.reuters.com/article/businessNews/idINIndia-43702720091105

China is now the worlds leader in gold production, and can set the price it wants in terms of what its buying for from its own domestic production.

The Chinese government is part owner of most of the mining operations in China, as it is with many infrastructure critical businesses.

Much of the world was shocked when China simply announced that it increased its gold reserves from the last reported figure of 600 tons to over 1000 tons in the short span of about 6 years.

Many wanted to know where this gold came from if they werent buying it on the open market. The answer? Their own domestic mines thats where.

Personally I dont think China feels it needs to "save face" over India buying 200 tons...China can simply keep buying its own production.

With India buying at an average price of $1045 that basically sets a floor under the gold price. Could China start buying out of the global market? Perhaps, I guess that would depend on how fast the dollar drops.

To me the best one can do if not holding the gold oneself and using a custodian of some type is to thoroughly understand the governance procedures used and verify they are current.

Cloudfire's picture
Cloudfire
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Joined: Sep 29 2008
Posts: 1813
Hold on a minute . . .

Now, hold on a minute, there.  If I get this straight, what we're worried about is that the gold bouillon in various vaults that back the paper in the Comex may be filled with Tungsten . . . Have I got that much right?

Well, here's the thing . . . If I were in the store-gold-and-sell-paper business, I'd be very sure that I'm buying gold, right?  I'd probably make it a point to test a few samples of each shipment, right? 

Back in the day when I worked as a lab tech for Baxter, we used to test all of the raw materials that came in for purity.  Wouldn't the gold dealers do so, too?

It would be relatively simple.  The volume of a gold bar can be determined by water displacement.  The weight and volume of the bar will give you the density.   Gold has an approximate atomic weight of 197.  Tungsten has an atomic weight of 184.  The difference between the two will show up in the density of the finished bar. 

This is chemistry 101 . . . Are we to worry that people who do this on a global scale can't figure this out, and wouldn't take these easy precautions?

Is there something I'm missing here?

Cloudfire's picture
Cloudfire
Status: Diamond Member (Offline)
Joined: Sep 29 2008
Posts: 1813
Re: Hold on a minute . . .

Cloudfire wrote:

Now, hold on a minute, there.  If I get this straight, what we're worried about is that the gold bouillon in various vaults that back the paper in the Comex may be filled with Tungsten . . . Have I got that much right?

Well, here's the thing . . . If I were in the store-gold-and-sell-paper business, I'd be very sure that I'm buying gold, right?  I'd probably make it a point to test a few samples of each shipment, right? 

Back in the day when I worked as a lab tech for Baxter, we used to test all of the raw materials that came in for purity.  Wouldn't the gold dealers do so, too?

It would be relatively simple.  The volume of a gold bar can be determined by water displacement.  The weight and volume of the bar will give you the density.   Gold has an approximate atomic weight of 197.  Tungsten has an atomic weight of 184.  The difference between the two will show up in the density of the finished bar. 

This is chemistry 101 . . . Are we to worry that people who do this on a global scale can't figure this out, and wouldn't take these easy precautions?

Is there something I'm missing here?

But, now that I think of it . . . You just keep spreading that rumor, Erik . . . I'll buy the rumor, and sell the news when independent lab testing shows that it's all pure gold, after all.  Money mouth  Wink

rapidtrends's picture
rapidtrends
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Joined: Jul 27 2008
Posts: 7
Re: Tungsten Salted Gold - Investment scam of the century???

Cloud, actually COMEX settles in 100 ounce bars and LBMA bars are approx 400 troy oz, but your comments re measuring density hold water with me (no pun)

400 oz (approx) good delivery bar

This is a picture of an LBMA "Good Delivery Bar" of approx 400 oz. taken at a bailment my firm just completed earlier this year.

You may notice the dings and dents in the bar that occur from NORMAL HANDLING...they are heavy and kind of slippery so I can imagine they get dropped in handling (I have not dropped one yet knock on wood).

Point being, tungsten has the highest tensile strength of all metals, if it got dropped or dented, wouldnt the layer of gold come off to reveal the tungsten underneath?

Also, wouldnt it become obvious after handling 4800 of these alleged tungsten bars and dropping / denting at least a couple of them what they were?

Not including any assaying required in random samples of such large batches?

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