The Trouble with Fake Money
It looks so real on the outside...
Take a close look at the picture below. Notice what’s in my hands.
The bar on the left is obviously fake. The bar on the right is too, even though it looks real.
Counterfeiters took the time to reproduce every detail of these gold bars. They’re kilo bars. That’s 1,000 grams or 32.151 troy ounces. At a value of ~$65,000 today it’s well worth the effort.
The fact is, someone paid market price for these fakes. It’s hard to blame them, they’re good fakes.
It’s a real-life example of sending good money after bad. It takes a long time to earn $65,000. I don’t care who you are, work is work. Seeing it vanish into thin air stings.
I saw these bars, and many more real bars, last week in Switzerland. I toured one of the largest private gold refineries in the world. It’s the key processing point for gold mined on six continents. It also handles recycled metal, scrap, and even reprocessing gold bars on behalf of the owner.
Reprocessing is what the paranoid do to make sure their gold hoard is free of worthless metal, like the bars I held in the picture above.
On the day I visited, I watched one tonne of gold bars reprocessed for this exact reason. One tonne of gold is 32,150 troy ounces. That’s worth around ~$62 million.
The owner of this gold sent it to the refiner by secure transport. Then asked that the gold be melted, adjusted from 99.99% pure gold to 99.95% pure. Then poured back into bars matching the size of those sent. They’d be stamped and certified authentic, then returned by secure transport.
I got to see the whole process. The forklift operator wheeled in a pallet loaded with about 60 gold bricks. One by one, another worker heaved them into a 2,200-degree caldron. That’s about twice the temperature of a residential house fire. Below that, gold does not melt.
Once boiling, the forklift operator watched his helper add a few pellets of silver to the boiling mix. This lowered the fineness from 99.9% pure to 99.5% pure. After testing the purity of the batch, he began pouring bars. This takes all day. I only watched for 10 minutes. I had a lot more to see.
The workers told me in addition to confirming the authenticity of his gold, the owner had some tax motivation for altering the fineness. 99.5% purity skirts an importing tax in the country he uses to store this gold hoard.
They’ve Seen It All
By the end of the day, you figure out these guys have seen it all.
They process about 500 tonnes of gold per year and nearly 6,000 tonnes of silver. That’s around 15% of annual production from gold mines. Some of the 500 tonnes of gold is recycled or reprocessed. 24-hours per day, 5-days per week, the place is humming.
The man in charge told me after 5 years they stripped the floor, processed it, and recovered 2,000 grams of gold. That’s the equivalent of the two bars I held in the photo above. When the floor has $130,000 worth of gold on it, you can only imagine the total value under the roof.
For obvious reasons, they forbid photos inside the facility. After an extensive screening, I had to leave all my possessions, and most of my clothing, in a secure locker room. This included my watch, belt, shoes, basically everything but my pants.
They issued me rubber shoes, a medical smock, glasses, and a hard hat before entering. Entering is a whole process, you pass through several airlocked door systems fitted with thermographic cameras. They want to see how you entered when it’s time to exit.
I ran into some trouble leaving. After walking through a 10-foot-long spinning brush shoe buffer, to remove any gold flakes on the rubber shoes, the exit process begins. More thermographic cameras, then a scan with a body wand. I failed.
It took a few minutes to explain to the non-English-speaking German security guard that the three gold crowns on my back molars were definitely with me when entered.
The Secretive World of Physical Gold