Fake gold can be produced by using another cheaper metal and coating the surface with real gold. This can be easily detected by weighing the object as the density of different metals are different.

For example, gold has a density of gold is 19.3g/cm3 while that of steel is 11.4g/cm3.

Therefore, a piece of real gold measuring 10cm x 10cm x 10cm would weigh 19.3kg while steel of similar size would only weigh 11.4kg. The standard gold bar held by central banks weighs 400-ounce (12.4 kg) and must be stored in recognized and secure gold bullion vaults to maintain their quality status and ensure maximum resale prices.

If the gold is of an irregular shape, the volume can be found be finding the displacement of water in a graduated cylinder.

The issue gets a bit more problematic when a fake material that has a close density to gold is used.

Uranium has a density of 19.1g/cm3 and would fit this criteria. However, it is radioactive so it is not that suitable.

Another metal is tungsten which has a density of 19.25g/cm3, almost similar to gold. Thus, a gold-coated tungsten would pass the density test with ease. However, tungsten is extremely brittle and has the highest known melting point of any non-alloyed metal at 3422 degrees Celsius, which makes it difficult to work with.

Nevertheless, gold-coated tungsten is being sold openly, one example is this China company, China Tungsten Online.

One author even suggests that fake tungsten gold is being widely circulated in the market, sometimes deliberately.

Short of cutting up a gold bar to see whether it is tungsten at its core, other ways of testing for gold fakes would be to use sound (sound travels at twice the speed in tungsten compared to gold), electrical resistance or thermal conductivity.

Someone sent me a question to ask me about Genneva Gold Sdn Bhd.

According to the information on the website, Genneva Gold sells you Gold Bullion at a 2% discount to the market price with a buy-back guarantee.

At the end of one month, the buyer can

1. Sell buy the gold to Genneva Gold at the market price based on the time he bought (thus making an immediate 2% profit)
2. Keep the Gold Bullion.
3. Rollover. Meaning do step one and buy a new Gold Bullion at a 2% discount to the current market price.

The deal seems too good to be true because the company is essentially selling you gold at a 2% discount and giving you a free put option.

There doesn’t seem to be any downside for the investor. If the price of gold goes down, he can sell it back to the company. If the price of gold goes up, he can keep the gold and sell it on a secondary market by himself.

genneva gold

Anyone considering this investment should ask important questions like:

1. How does Genneva Gold generate revenue/profit from this entire transaction?
2. Assuming an investor does just the bare minimum and rollovers his investment for 12 months, he would have made a 24% return. How does Genneva Gold substain this payout?
3. How do you verify that the gold you receive is worth its weight in gold?

There is a “Terms and Conditions” to the 2% discount thing though. I would be interested to know what they are.

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In general, the price of gold and oil have a positive correlation.

When oil prices rise,there is an upward pressure on inflation. This enhances the use of gold as an inflation hedge.

Historially, oil purchases were made with gold.

One way of identifying trading opportunities is to use the gold-oil ratio. This can be calculated using this formula:

Gold-Oil Ratio = Price of Gold (per oz.) / Price of Crude Oil (per barrel)

In the last 30 years, this ratio has traded between 8 and 30. Here are a few charts:

The present gold-oil ratio is less than 9. If prices revert to the mean, that means we will have to see a pullback in the price of oil or rise in the price of gold.