By Marcus Stewart, UK Director of Business Development for Pointer Brand Protection
The historical and cultural importance of gold has resulted in it becoming one of the most significant and stable strategies for economic investment, leading to a huge financial market for its trade. As with all industries that create value, the mining, refinement, and consumption of gold has also led to the occurrence of counterfeits. This article discusses the problem of counterfeit gold and suggests some strategies for businesses suffering from the trade.
The modern demand for gold derives from four main areas; its status as an investment, its use in technology, its appeal for consumers and the jewelry market, and its role as part of the asset-backed currency strategies of central banks. Additionally, however, the gold mining industry is also a substantial producer of global wealth, with one 2013 report suggesting that mining directly employed more than one million people and contributed an annual $83.1 billion to the global economy.
Global Gold Demands and Dangers
As an investment, gold appreciates in value during times of political and economic instability. This is why, as a result of the ongoing uncertainty over the trade talks between the US and China, in early August 2019 gold prices jumped to their highest level since 2013. The lack of clarity over how far the talks will escalate has meant that so-called “safe haven” assets like gold have become more valuable because they maintain a steady position against any potential slide into recession.
Beyond its status as an investment, however, gold is also used in a range of technologies which increase its value too. As an efficient conductor, gold has become a vital part of electronic components and can be found in miniscule amounts in mobile phones and computers. In industrial and medical situations also, gold has applications that run from nanotechnology to the treatment of disease.
The biggest single market for gold is the jewelry sector, which accounts for over 50% of global demand. In recent decades the main market for gold jewelry has moved to Asia, where gold gifts are culturally important, and where rising standards of living have also resulted in increased consumption. India and China now account for the bulk of consumer-driven gold purchases.
With so much economic and practical value tied to the integrity of the legitimate supply chain, preserving it against counterfeits is paramount, but examples of fake gold have become increasingly common.
Fake Gold in 2019
Although gold is important to several industries, the current danger from fakes comes chiefly from jewelry, coins, and bars. As the EU’s biggest jewelry producer, Italy is representative of the global problem for jewelry brands as it’s one of the places most at risk – with one 2016 EUIPO study suggesting that the counterfeit jewelry and watch market there was worth €400 million in lost annual sales. Each year, Italian authorities seize tens of thousands of fake Italian gold pieces masquerading as the genuine article – both unbranded and falsely attributed to top fashion designers. As the testing of gold is more difficult than many other counterfeits, and relies on laboratory conditions, it can be almost impossible for high-quality fakes to be detected.
Like many areas of black market production, the manufacture and sale of counterfeit gold is centered in China. Unlike some areas of counterfeiting, which do not rely on highly skilled labor or equipment, the third generation of fake gold (that which has been produced since 2015) is highly organized because of its industrial scale. The crucial component in making and selling fake gold is the substance which has been repeatedly found at the core of fake gold bars and coins, tungsten. Tungsten is an industrial metal that has the virtually the same density as gold, but which only costs a fraction of the price. The similarity of the materials has enabled counterfeiters to create gold-plated tungsten bars which have the appearance of the genuine product.
In some cases, Chinese factories coat tungsten cores, while in others, genuine gold bars and coins are drilled, hollowed out, and then filled with tungsten rods. The fake goods are then stamped with reproductions of official serial numbers and purity markings before being filtered into the supply chain through middlemen and online adverts. In one 2012 case, ten such bars were found in New York after a Russian salesmen introduced them to dealers and stole hundreds of thousands of dollars.
These same tungsten fakes regularly make their way into the hands of consumers, who purchase limited edition coins only to find out that the thousands of dollars they have invested are gone. The improvements in the technology available to counterfeiters, and the frictionless trade enabled by the internet, have pushed the situation to unprecedented levels, with the American Numismatic Association stating that coins are now “flooding the market at an astonishing rate.”
One of the growing problems is that many online adverts on Chinese wholesale sites list the products truthfully as “gold plated tungsten,” yet when these items are then received and passed on from hand to hand in different markets, their designation may change and not include the whole truth. On many of the online listings there are statements such as, “our coins and bars can pass the real gold test,” and, “The material of our product is tungsten and gold. As you know, the densities of tungsten and gold are similar. So we can guarantee the weight of our coin (bar) is the same as the original.” One question might be why these products would need to pass off as real if they were not being subsequently re-sold as if they were?
How Can You Stop Fake Gold Listings and Products?
With so many industries and brands affected by the sale of fake gold, the brand protection and anti-counterfeiting solutions must be similarly diverse. For companies involved in selling bullion and coins, these solutions are also complicated by the fact that gold testing is technically difficult and impossible from the detail given in online listings alone. Yet, for the range of associated enterprises, brand protection can still perform a valuable function.
At Pointer, our certified Investigations team make test purchases, scour information sources, and provide detailed threat reports that lead directly to prosecutions. Through our advanced data clustering technology we have enabled our clients to strike effectively against a range of illicit manufacturers who produce goods as various as illegal tobacco and pharmaceuticals. These investigations have been directly responsible for disrupting the trade in counterfeit goods by providing comprehensive summaries of information drawn from online and offline sources. Once these reports have been supplied to the relevant law enforcement agencies, they make a compelling case for intervention.
Where jewelry and watch brands have their trademarks, designs, and copyright infringed by online listings, one solution may be the proactive and aggressive removal of counterfeit listings. Through our Revlect platform, our trained analysts constantly monitor marketplaces, domains, and social media to ensure that all infringements are targeted. Crucially, these removals should be strategically accomplished according to relevant threat levels and available IP rights. For a fuller understanding of how we can provide this consultancy for your business, contact us here.
Finally, one of the most important components of any brand protection strategy is developing knowledge. For brands to protect themselves they need to be fully aware of the dangers they face, which they can then use to communicate internally and externally, in addition to educating consumers. For the gold industry, for example, there are far-reaching harms from counterfeiting that go beyond the purely economic. The ethical mining of gold and other materials is a growing industry that touches on sustainability and human rights. When counterfeit goods are manufactured, however, they are not produced with the same level of stringent adherence to legal regulations, potentially resulting in damage to the environment and the exploitation of workers and resources. As experts in the anti-counterfeiting world, we work with brands to help them better understand the consequences of taking active brand protection positions.
Whatever your needs or your industry, knowledge and action only come through working with the right partners, those who can provide proven expertise in the field. Pointer have the experience to help you make a difference so why not start the conversation today.