Authentic – it’s a great word, isn’t it? In an industry as unfortunately filled with fakes as the secondhand bullion trade, authenticity (and the evidence to prove it) have a value all their own. In this guide, we’ll take a look at the way mints and jewelers authenticate their creations, then go over what you should look for when buying.
(Remember, some sellers only store your purchases in their own vaults, so you won’t have the chance to examine them in-person – this is why being able to trust the seller is so important.)
Good Delivery: The Ideal Chain Of Ownership
When it comes to bullion, the phrase Good Delivery is most often associated with the London Bullion Market Association, which sets and enforces rules about the size and purity of bars. However, the phrase has a second meaning within the market: The creation and use of a closed chain of ownership. The process goes like this:
- First, the bullion (in whatever shape) is created at a trusted mint or refinery. This isn’t something that just anyone can jump into – gaining market-approved status often involves everything from physical inspection to random product checks until the business is established. This helps to ensure that everything they make later can be considered authentic.
- Refineries often add important details to each bar, including the purity, serial numbers, and their own stamp as a maker. This helps to make each bar unique and easier to track.
- When the bullion is ready to be shipped out, it’s loaded onto an approved transport vehicle (usually an armored car) run by an established security company. These companies are trusted to move high-value items around and are incentivized to not mess with the contents of the delivery – and at any rate, any tampering would be immediately detected.
- The transport company delivers the bars to an approved storage facility. The bullion will either remain here and be shifted around in the vaults, or it will be mailed out to new owners when purchased.
- Some bullion is simply kept in storage, but other bullion is used in a variety of industrial applications – and the original refinery has no idea what buyers will be doing. This creates a randomized check because industrial buyers will notice impurities and hold the sellers accountable for failure to deliver authentic goods. As such, the markets are highly motivated to weed out fakes.
These factors create a chain of ownership for the bullion – there’s no point, from creation to delivery, when nobody knows who’s responsible for each piece. When you add in all the quality checks, this type of Good Delivery process ensures that any bullion you buy is 100% authentic.
Trust is key in this industry, so most markets are proactive about security and actively work to stop counterfeits. Overall, this system is widely successful – there’s a reason you almost never hear about problems in the professional bullion market.
Significantly Less Safe: The Secondhand Bullion Market
When you define authenticity, there’s more to it than possessing an item that is what it claims to be. There’s also the feeling of being able to trust the source… and in many cases, you can’t do that in the secondhand bullion market.
Picture this situation: You’ve just come into some money and decide that you want to diversify by adding a few silver bars to your collection, so you head down to your local bullion exchange. As it happens, they have a few new bars in – sold to them by someone who came in the day before.
A convenient situation… right? Nope. If you’re a serious investor, you’re going to avoid that sold silver like the plague. It could be fake, especially if the bullion store hasn’t had time to verify its authenticity yet. All you know is that someone came in to sell bars they claimed were pure silver – you don’t know if that’s true or if they’re parting with well-made fakes from Asia to get a quick buck.
We’d like to say that every employee at a bullion shop is an expert who knows how to tell fakes apart, but that’s just not true. This is especially important at a time when fakes are getting harder for amateurs to recognize.
Thus, when trying to figure out ‘What does authentic mean to me?’, it’s important to consider the entire history of a piece of bullion. If you’re investing hundreds or thousands of dollars into a given piece, the least you do is define authenticity that’s acceptable to you.
How To Find Reputable Dealers
There are many ways to find reputable bullion dealers. You can look for stores in your local area, of course, but these days many of the best markets are online. Here are some things to check for:
Explanation Of Security Measures
Every good market explains the security measures they use to ensure Good Delivery and verify the authenticity of the bullion they sell. While the actual title of the page varies, you should be able to find something on the site that details their plans.
The best markets directly ensure their products. Of course, as many people know, it can be hard to say that text on a website is a binding contract for buyers. To further protect yourself, consider asking the market for a formal, binding explanation of their security measures, responsibilities, and insurance measures. Most sellers are happy to provide this information and work to convince you that you can, indeed, trust them.
The next thing to consider is where the market gets its products. A secondhand marketplace that just resells things isn’t nearly as trustworthy as a market buying from specific mints. For example, APMEX is a market with its own branded products from Sunshine Minting, Inc., a global provider of blanks, bullion, and custom minted items.
Trust is everything in the bullion industry – and the better the sourcing, the safer you’ll be.
It’s okay for a market to both buy and sell products – what really matters is what they do with them afterward. The best scenario is that a market buys precious metals, subjects them to extensive authentication, then sends them back to the mint to be reforged – even if it’s their own brand. This process ensures that you’re always buying bullion fresh from the mint.
The exception to this is, of course, collector’s pieces – melting them down can drastically reduce their value. If you’re buying a piece like this, ask the market what kind of authentication they’ve done to ensure the piece is genuine. Ideally, the piece will have been subjected to as many tests as possible, giving it an authentic definition the seller can describe in great detail.
Holding on to gold is nice, but the truth is that storing it at your home is fundamentally less safe than keeping it at a secure storage facility. Many precious metal markets have their own storage vaults where your purchases can be kept safely isolated from the world.
Of course, this does beg one question: If you never hold it yourself, how can you be sure the piece actually exists? Couldn’t mints and markets be colluding to make you think they have 100% authentic gold when they really don’t?
Well… no. Remember, markets don’t sell exclusively to investors. They also sell precious metals – especially, but not exclusively, gold – for a variety of industrial applications. They have to deliver physical products for those purchases. For that matter, most markets don’t actually require you to store things in their vaults. It’s recommended, but it’s not mandatory.
The fact that you can get the physical version of anything you buy thoroughly prevents the markets from scamming you.
Is There Anything Else I Should Look For?
Yes. One other thing to check for is the variety of products that a market has. If it’s only selling one type of bar, that’s a major red flag. The most reputable markets often have hundreds or even thousands of different products for sale, including some rare and unique coins.
This provides an added layer of security because every fake product carries the risk of exposing the seller as a fraud. It’s effectively impossible to have an inventory of thousands of different fakes – someone would notice, and likely sooner instead of later. (This is especially true for rare coins, which people usually want to take physical ownership of and add to a collection.)
Bringing It All Together
As you learned above, you can find authentic bullion by:
- Only buying products that remain in Good Delivery status
- Checking marketplaces for details about their inventory and efforts to define authenticity
- Making sure at least some of their inventory is physically delivered to buyers
When you’ve done this, you can be sure that you’re buying 100% authentic bullion.