counterfeit factory

High silver and gold prices and record bullion sales in the early 2010s ushered in a revolution (for the worse) in counterfeit bullion manufacturing.  Combined with the prevalence of online shopping and popular peer-to-peer selling platforms, counterfeit bullion is a growing problem that won't be going away any time soon.


While monetary counterfeiting is as old as currency itself, and numismatists have been dealing with altered and faked collectable coins for decades, bullion collectors have long been spared the trouble of widespread fakes.  Many in the community swore by government-issued silver coins like American Eagles or Canadian Maples believing no one would dare to counterfeit official government coins, or by 90% "junk" silver believing it to be too small and cheap for anybody to bother counterfeiting. 

Unfortunately, events of recent years have proven those theories to be wildly inaccurate.

Numerous Chinese manufacturers seized the bullion boom as an opportunity to expand their product lines.  Companies previously focused on numismatic "replicas" and other items manufactured with similar equipment (such as badges, medals, and tokens) turned their attention to the previously untapped market of small silver and gold bullion.  With computer-aided scanning, drawing, and machining, modern coining and plating operations, and no shortage of cheap labor, these companies have developed low-cost high-quality counterfeits, producing large quantities in a wide variety of styles.

electroplating lineElectroplating line in a Chinese factory.

Of course manufacturing is only half of the equation.  Distribution is just as important.

Chinese manufacturers didn't just randomly begin to produce high-quality counterfeit bullion.  Scammers here at home are equally responsible for driving the demand for counterfeits.  China will produce anything a buyer asks for, from drywall to dog food, and at whatever level of quality the buyer is willing to pay for, from dollar store disposables up to the latest and greatest iPhone.  Without buyers, none of these fakes would exist, and it's not like the Chinese manufacturers are personally flying fakes into the United States to sell a handful at a time. 

Thousands of small-time scammers in North America and Europe buy fakes from Chinese manufacturers (who accurately advertise their products as "plated replicas") in bulk and resell them on eBay and Craigslist, at pawn shops and flea markets, and in some cases even to unsuspecting coin dealers.  In fact these middle men make more money than the counterfeiters themselves do, buying fakes from the Chinese manufacturers for $2 - $4 and reselling them for around spot ($16 - $30 for silver in recent years, $1100 - $1900 for gold).  Even with today's lower prices, there is still plenty of motivation for dishonest people looking to make a quick buck.

The result is that there are now hundreds of thousands (if not millions) of counterfeit pieces circulating in the bullion market, with more being introduced by scammers every day.  A piece may go through several innocent owners before a knowledgeable collector or dealer identifies it as a fake and removes it from circulation, and it is likely that thousands more have been stashed away in safes and won't surface for many years.  Even if the production of fakes was brought to a complete stop today, the pieces already in play would continue to present problems for decades to come.  But the grim reality is that the coin and bullion community is all but powerless to stop foreign manufacturers in a country with no concept of intellectual property rights.

The people we call counterfeiters are considered skilled craftsmen in China, where the practice of reverse engineering and duplicating a product is a respected profession.  And though metal prices have fallen sharply since the beginning of the influx of fakes, the production equipment and distribution channels are already in place, and they won't sit idle so long as scammers see an opportunity to make easy money. 

coining pressesCoining presses in a Chinese factory.

No government is likely to offer a solution.  The Chinese government has no interest in stifling a profitable industry, so the chances of reform from abroad are next to zero.  While legislation has been updated to better address modern coin and bullion scammers caught in the act here in the United States, only a small percentage ever get caught, and the potential penalties are likely not enough to discourage criminals looking for a quick buck.  Not only is it physically not feasible to open and inspect every package entering the United States from abroad, but identifying counterfeits requires background knowledge most customs workers don't have.  Be careful what you wish for...a federal initiative to stop counterfeits at the border could well result in legitimate bullion and coin imports being wrongly identified and seized, and would certainly require more paperwork, increase shipping delays, and create more opportunities for items to be lost or stolen along the way.

While there is no putting the cat back into the bag, what we can do as a community of bullion dealers and collectors is educate each other on how to identify fakes to avoid purchasing counterfeit goods, and when found, report those who are peddling them.  Knowledge is the best defense against fakes, and the goal of is to provide a central destination for helpful knowledge.

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