In these uncertain economic times, you don't have to be a miser to consider putting some of your money into precious metals, and gold and silver coins are an easy way to do that.
But this increased demand for bullion coins — like the American Eagle, South African Krugerrand and Canadian Maple Leaf — has created a golden opportunity for forgers.
Counterfeit coins are “flooding the market at an astonishing rate,” and compromising the investments of collectors, according to the American Numismatic Association (ANA).
“It’s a very serious problem and it’s really scary,” said Rod Gillis, ANA’s education director. “With improved technology, the fakes are getting better. It’s gotten to the point where even people who deal with coins all the time may not be able to recognize a counterfeit coin right away.”
Read More: Florida Man Arrested in Theft of $5 Million in Gold
Another veteran coin dealer agrees.
“There’s a reliable supply of bogus coins coming from China into the U.S., and it has been getting more authentic-looking over the years,” said Brad Karoleff, a veteran coin dealer who owns Coins Plus in Cincinnati. “At first, they were laughable, but as they’ve become savvier, they’ve been making counterfeits that look much more like the real thing.”
Get fooled and you could pay $1,300 or more for a counterfeit one-ounce gold piece that’s worthless. And you may not discover you’ve been taken until you go to sell it and a dealer tells you that coin is a fake.
“It is clear there is an increase in the types of fakes sold by unscrupulous dealers,” Dana Samuelson, president of the Professional Numismatists Guild, said in a recent news release warning about the growing problem. “These sales of counterfeit coins are potentially a multi-million dollar problem for the public.”
Coin dealers and pawn shops are also being targeted. Eric Hoolahan, CEO of Bellevue Rare Coins, with several stores around the Seattle area, says criminals are buying these knock-off coins and trying to sell them to stores that may not know how to spot a fake.
“It doesn’t cost them much, so they don’t need to get top dollar,” Hoolahan said. “Even if they get a pawn shop to pay them half the market price, they’re doing great.”
How they do it
Brian Silliman, who has an online dealership, Brian Silliman Rare Coins, has been to China and seen the counterfeiting operations there.
“They take the actual image of the coin, use a graphics program to touch it up and then they send it to an engraving machine that cuts the die. They’re doing it just like the Chinese mint does, but it’s not the mint,” Silliman told NBC News.
Read More: Bunch of Bullion: Dealer Says Gold Coin Hoard Not from Heist
Most of the counterfeit coins are made from a base metal, like tungsten, that is plated with a little gold. This way it will pass the acid test that indicates gold. If it is well-made, the fake will weigh the same as the genuine piece, making it even harder to spot.
Coin expert Susan Headley recently noted in her post Inside A Chinese Coin Counterfeiting Ring on About.com that these counterfeiting operations are run like legal businesses. “There is no law in China against making these ‘replicas’ as long as they are sold as such,” she wrote.
There’s a new trick to fool buyers
William Gibbs, managing editor of Coin World, says some crooks are now putting their fake gold and silver coins into authentic-looking collector coin holders called slabs, complete with bogus bar codes and registration numbers. This makes it look like the coin has been authenticated by a reputable grading service.
“So even if you’re ordering a coin online that shows it’s in a slab from a reputable grading service, those holders could be fake,” said Gibbs said.
The only way to verify the slab is to call the grading company and give them the registration number.
Why isn’t something being done about this?
The Internet makes it easy for unscrupulous dealers to buy counterfeit gold and silver coins made in China.
“The bad guys are buying these fake coins by the hundreds on websites like Alibaba.com,” said Doug Davis, founder and president of the Numismatic Crime Information Center.
A lot of these fakes are then sold on eBay and Craigslist, or through newspaper ads that promise a great deal on gold or silver coins, Davis told NBC News.
It’s often difficult to get local police departments involved in these cases because they’re not coin experts and it’s often a challenge to decide if a crime has been committed.
Coin dealer Karoleff would like to see federal law enforcement agencies take a more proactive position.
Read More: Couple Smuggled Millions in 'Hell Money' Into the U.S., Officials Say
“The Secret Service hasn’t been a lot of help trying to stem the tide of these fakes until recently, but as they become more and more realistic, we’re starting to get a little help,” he said. “Until we get more stringent penalties for the people caught passing these and producing them and importing them, it will continue.”
Buying precious coins at a flea market or from an unknown seller has always been risky — even more so now.
If you want to buy gold coins, shop at a reputable dealer — whether that’s in person or online — that’s been in business for a while. You want a company that will guarantee what they sell you and stand behind it if there is a problem.
It could be cheaper to order from an unknown source, but that could wind up costing you thousands. And if you get burned, you’ll never get your money back.
“There’s an old saying that can help buyers avoid problems: If you don’t know coins, you better know your dealer,” said Dana Samuelson of the Professional Numismatists Guild.
Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan.