How to Spot Fake Coins and Replicas on Ebay

In my last blog entry I talked about buying silver on Ebay, and over the past couple of days I've been looking through a lot of Ebay and Yahoo Auction listings. Despite online auctions presenting a unique opportunity to trade precious metals from peer to peer, there are dangers of fraud that you need to be aware, most notably fake coins and replicas being passed off as official coins. What got me looking into this issue was a listing about a 2002 1 kilogram Silver Panda coin. Immediately I thought "Wow, the Central Mint of China must have produced some large size proofs of the Silver Panda! I have to get one!" Then I clicked on the listing and had a look at the photos and desription. My instincts alerted me that something was wrong, and I didn't bid on the item. Something about the coin didn't seem right. Here's the photo of the "Silver Panda" on Ebay.


























I went straight to Google images and searched for a 2002 1 kilogram Chinese Silver Panda, but couldn't find one. So I looked at some 1 oz silver pandas, and right away I noticed a few differences that confirmed by instinctive feeling. The 1 kg giant Silver Panda was not a Silver Panda at all, it was either a legal replica of a silver Panda and struck by a private mint, or an illegal fake. Either way I was highly suspicious that this coin was made of real silver, at least not pure silver. The obvious differences between the 1 kilogram item and a 1 oz Silver Eagle's design are the lack of a face value in Yuan, signifying that this is not legal tender, and the lack of the purity indication "1 oz Ag .999" (instead it simply reads "1 oz"). The implications of that are most certainly that this replica is not made of silver at all, but probably nickel or a cupronickel alloy. My guess is that because those markings are removed, this coin is a legal replica in China but that the vendors are fraudulently passes these off as real silver bullion coins when they are not.

Yesterday I saw at least a dozen identical items listed on Ebay, all originating in Hong Kong or China, several having the exact same photos and description page but different user names. Today it seems that all of the listing have been removed as complaints come in and Ebay closes the offending accounts. After looking around the Ebay forums I discovered that there is a huge problem with counterfeit coins and misrepresentations coming out of China. There are items like the above misrepresented replica, but there are other items which are the same as real bullion coins in size and design but have either reduced precious metals content or no precious metals content.

How can you prevent falling for fake precious metals scams on Ebay? Well, the first step I would take is to avoid purchasing from anybody in China, or in any other country where I think that regulations are lax. But beyond that there are signs to watch out for. Many of the fake Chinese Panda coins and others have a very low starting bid, often less than $1 US. But they have exorbitant shipping costs, which the seller keeps for himself. In the case of the 1 kg Panda replica above, the starting price was $89 US, but free worldwide shipping was being offered. Would a legitimite individual vendor really offer free worldwide shipping on a 1 kilogram item? I really doubt it. Another sign was the vendor's sales page, which looked like a desperate attempt to seem like a professional page but totally missed the mark. And another key indicator was that the vendors often had 0 previous transactions or a small number of previous transactions. That's because they're constantly getting banned and signing up with new accounts.

In addition to intentional fraud, there must be a lot of sellers out there who unknowingly bought fake bullion and are now reselling it without bad intentions. I read on the Ebay forums that one man bought a lot of American Silver Eagles, exclusively from vendors with excellent feedback scores, yet still 10% of his coins turned out to be fake when he sold them to his local bullion shop. The way to avoid this is to determine whether your purchase is authentic upon receipt. You could always have the item appraised by taking it to a local vendor and acting like a potential seller. Another simple way could be to weigh the coin, since a 1 ounce silver coin should weigh 31.1034768 grams, or 1.097142857 ounces (remember that troy ounces and Avoirdupois Ounces used for weight are slightly different). Nickel and copper for example are lighter than silver, so a cupronickel fake Silver Eagle would weigh less than a real Silver Eagle, assuming they were both the same size. There are also acid test kits you can buy. You apply a drop of acid to the bullion, and depending on the resulting color you will know the purity of the precious metals content. These are widely available through online shopping, such as amazon.com. If your bullion does turn out to be fake or of a different quantity or purity than you were led to believe, then you should contact Ebay immediately to file a dispute. If you pay by Paypal it is supposed to be easier to dispute purchases and get your money back. Though in the case of fraudulent vendors who make one sale then vanish, I'm not sure you will get any money back.

I don't want to discourage you from using online auctions to increase the size of your gold and silver stack, but I hope you take precautions and don't let the
ticking auction clock prevent you from doing your due diligence when shopping.

What's the difference between coins, rounds, and medallions?

When shopping for bullion coins you may have encountered something called rounds, and been confused about the term and what it means. Similarly you may have encountered medallions and wondered how they differ from coins. The basic difference between a coin and a round is that a coin is officially minted and is legal tender, while a round is not legal tender, and is usually privately minted. In its most standard usage, the word "medallion" refers to a metal piece that is, similarly to a round, not legal tender. But the word "medallion" tends to be used for a lot of commemorative coins aimed at collectors, whereas "round" tends to be used for bullion coins aimed at investors.

An example of a bullion coin is an 1 oz. American gold eagle or American silver eagle, since they are legal tender and officially minted by the US Mint.

An example of a silver round is this North West Territories (NWT) Mint one ounce silver round. I can't give you an example of a gold round, because even though I know they exist they are rare. Gold is so much more valuable than silver that investors prefer the safety of officially-minted and well-recognized coins.

An example of a gold medallion is this Winston Churchill commemorative medallion.

It should be noted that while the above definitions are the most common specific definitons, the word "coin" is often used in a general sense to refer to all
coin-shaped items. But a true "coin" will have a clearly marked face value in the currency of its country of mintage. For example, a 1 oz American Gold Eagle has a face value of $50. A generic silver round will not have a face value indicated, but just the precious metals weight and purity. For example, "1 troy ounce .999 fine silver" as printed on the NWT silver round. Commemorative medallions sometimes don't even have the precious metal content and purity written, so to determine that information you need an appraisal or certificate of authenticity.

Are there any advantages of coins over rounds and medallions?

Well, as mentioned before, officially-minted coins are easier to trust and feel secure with, since you know that your bullion purchase was made in accordance with all laws and regulations. In addition, officially minted coins, especially major ones like Maple Leaves, American Eagles, Krugerands and the like, are highly recognizeable and very liquid because of their visibility. The downside of officially minted bullion coins is that they carry a relatively high premium, partly because of higher demand but partly because they are not sold directly from the mint to individual investors, they first go through middle men. The US Mint for example sells its coins to distributors called "Authorized Purchasers". The authorized purchasers then mark them up and sell them to bullion retailers, who also mark them up before selling them to you. So in the case of an American silver eagle, you pay a significant premium over the spot price of silver to pay for the operations of distributor and bullion retailer.

In the case of a silver round, you can order directly from the mint, or retailers order directly from a mint, so you pay a lower premium over the spot price. This difference in premium can be quite hefty, for example the current spot price of silver is around $13.50, but an officially minted 1 oz bullion coin will probably command at least $18 while a silver round could be bought for as little as $15. If you are buying in large quantities, silver rounds could help you accumulate a significantly larger stack. When selling your silver rounds, they will of course command a lower price than officially minted bullion, but you should be able to get at least the current spot price. If you are living somewhere where your round is not recognized (or in my case, the silver ingots I bought in Japan), then you may have to sell your metal to a melter at less than spot. But you can always sell back to the mint you bought it from, at a small price spread. So basically, while officially-minted coins have the benefit of immediate recognizability and liquidity, rounds are more of a direct investment in physical bullion. When it comes to silver I personally prefer to hold about 1/3 of my stack in widely recognized bullion coins, and 2/3 in silver rounds. That way I have some guaranteed liquidity for emergencies, but still have the benefit of buying at lower premium rates.

As for medallions, if they are not in high demand then they can be treated like a round. But if they are sought-after by collectors then they will likely command
a numismatic premium well beyond the spot price of gold or silver. I personally stay away from almost all numismatic coins because I'm much more of an investor than a collector. But if I find a medallion at close to the spot price, I might buy it. The problem is making sure that you know its constituent metals, weight, and purity which are not always indicated.

A note of caution: there are a large number of rounds and medallions that are replicas of officially-minted coins. They are legally allowed to reproduce the images of officially minted coins, but they can not be the same size and dimensions as the original. You may encounter some 1 pound or 1/2 pound "American Eagles" for example (see the example below). If you buy them from a legitimite private mint, then you can trust that their precious metals content is genuine. The weight and purity should be written on the round. Please be aware that such replicas exist, and understand what you are buying. Some of the private mints have names that sound official, like "Washington Mint" or "American Mint", so novice investors may assume they are buying an official proof coin. And there are vendors, especially on Ebay, who will avoid telling you that these are replicas. Be sure to examine the pieces you are interested in buying, check for a face value, and if the coin is of an unusual size, do your research to see if such a large version was ever officially minted. You can quickly find out a lot of this information online, as long as you know to look.

Buffalo Silver Rounds

uffalo silver rounds are some of the most popular silver investment items being sold today. their design is based on the Indian Head nickel, also known as the Buffalo nickel, which was minted between 1913 and 1938.

Buffalo silver rounds are not produced by the US Mint, but rather by a private mints, with the most popular version being produced by the Wall Street Mint. They have no official connection with either the Indian Head nickel or the American gold buffalo coin, but is rather inspired by their design.

On the obverse of the Wallstreet mint issued round is a portrait of a Native American man along with the word "LIBERTY" at the top right edge. On its reverse is an image of a buffalo, along with the purity and fineness listing of ".999 FINE SILVER" along the top edge above the buffalo, along with the weight description "ONE TROY OUNCE" below the buffalo at the bottom of the coin. It has a diameter of 37 mm.

If you don't buy directly from mints or reputable dealers, be careful of fake buffalo silver rounds. I have heard reports of fakes made of silver plated copper, which can be spotted by their marking of ".999" or ".999 FINE" instead of ".999 FINE SILVER". Real silver 1 oz. rounds weigh 31.103 grams, but the fakes weigh 3-4 grams less than that.

Since they are not officially minted bullion coins but rather silver rounds, silver buffalos can be bought at significantly lower premiums than officially minted silver coins like the American silver eagle. They will, of course, sell for a lower price to, and since they are not world famous like silver eagles they may not be as immediately liquid. But silver bullion is silver bullion, and buffalo silvers are an efficient way to invest in silver at prices close to spot.

Washington Mint 4 Oz Golden Eagle

In some recent entries I've written about some silver rounds that are replicas of officially-minted classic coins. Today I'll show you an example of a replica coin, or silver "art round" as they are sometimes called. This is a "Giant Quarter Pound Golden Eagle" produced by the Washington Mint (note that this is a private mint, not the US Mint). The quarter pound Golden Eagle is a replica of the American eagle gold bullion coin, approximately copying its design of St. Gaudens' Lady Liberty and the American Eagle. However, it is not a gold coin, it is a silver round containing one quarter pound of .999 fine silver, and 24 karat gold plated.



A quarter pound is equivalent to 4 oz. troy, and this silver art round's price is based on the spot price of silver. The gold plating is pretty thin (in the certificate of authenticity it says "layered with" gold), so the gold layering doesn't really affect the price, it seems, since it's such a small amount.

The thing that immediately distinguishes this item from an original American eagle is its size. Its diameter is 3.5 inches (89.8 mm), while a 1 oz American gold eagle's diameter is 32.7 mm and a silver eagle's diameter is 40.6 mm. Its name also does not include the words "American Eagle" but rather "Golden Eagle". But you will see people selling these under the name "American Eagle" to give the impression that they are officially minted. I bought this one on Ebay, and it was referred to as a giant American Eagle. I knew what it was, so I wasn't fooled, but other less-informed buyers might be misled by such mislabelling.

The Washington Mint also produced giant 1/2 pound golden eagles and 1 pound golden eagles, as well as silver eagle replicas and platinum eagle replicas of the same giant sizes. The silver and platinum versions are also silver rounds containing .999 fine silver, with the platinum eagle replica being layered in platinum.

Even though these rounds are replicas of official bullion coins and may not be as liquid as officially minted eagle coins, they are indeed fine silver bullion and I expect to have no problems selling mine for at least the spot price of silver. I'll have it melted down if necessary. I wouldn't pay too much of a premium above spot price for this kind of replica though.

Mexican Fifty Pesos Gold

The most popular gold bullion investment coins continue to be US American Eagles, Canadian Maples Leaves, and other widely available and very liquid coins. But another coin that continues to be a strong gold investment is the Mexican 50 peso gold coin. It has a number of features that are different from the most popular bullion coins. First off, rathern than containing exactly 1 troy oz of gold, Mexican 50 peso gold pieces contain 1.2057 troy ounces of fine gold (37.5 grams). It is also struck in 20 karat gold, in other words 90% pure gold with the remainding 10% being copper. This gives them an orangey color similar to a South African Krugerrand.

Because of their high gold content and additional copper, they are quite large coins, with a diameter of 36 mm and a total weight of 41.67 grams. Compare that to a Canadian Maple Leaf which has a diameter of 36.07 mm and a total weight of 31.65 grams, and to an American Eagle that has a diameter of 32.7 mm and a total weight of 33.39 grams.

The 50 peso coin was minted in two runs, from 1921 to 1931, and again from 1944 to 1947. The earlier series sells for a somewhat higher premium, but the later restrikes sell at a low premium above spot, similar to the low premium of South African Krugerrands. They therefore make a good bullion investment. I was surprised when I first learned about their low premium, assuming that their age would give them more numismatic value.

Mexico gained independence from Spain in 1821, and the 50 peso coin was produced for the centennial celebrations of Mexico's independence. The obverse of the coin features "El Angel de la Indepencia" (which you can probably guess means "The Angel of Independence"), an image of the statue erected in Mexico City for centennial commemoration. On the reverse of the coin is the Mexican coat of arms.

Because of their relatively large size and captivating imagery, Mexican gold peso coins are striking and enjoyable coins to have as part of your physical gold stack. But they are also solid bullion investments. Just don't let their beauty prevent you from selling them when the price is high! Don't fall in love with your investments or you'll make unwise decisions. But with some self discipline you can enjoy both the coins and the money they will eventualy yield for you.