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“A Man Walks in with a Bar…”
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(January 29, 2006) Yesterday was the official start of the Year of the Dog, tomorrow is the last day of the reign of Alan Greenspan as head of the Fed, North Korea is turning out superb counterfeit US $100 bills, and I have a gold bar story for you…
This past Sunday’s New York Times headlined the fact of North Korea’s production of a nearly perfect US $100 bill, a “supernote” which has been found all over the world. US investigators have found over $45 million in these notes, which are virtually indistinguishable from the real thing. Allegedly, they are printed on North Korean government presses and used to supplement its miserable economy.

Unfortunately, the suppression of extremely accurate counterfeit $100 bills is not a high priority in our “diplomatic” attempts to deal with one of the world’s last standing communist dictatorships.

Martin Fackler of the Times wrote on 1/29/06,

“Using government printing presses to run off another country’s currency would appear to be the sort of criminal act that demands tough international penalties. But Washington’s effort to press its case has become mired in the tricky politics of an even larger and more serious problem: nuclear proliferation.”

So, counterfeiting’s bad, but that’s not what earned North Korea its membership in the Axis of Evil. US policy is, and remains: One Thing at a Time.

Speaking of the neglect of US monetary integrity, Alan Greenspan ends his tenure at the Federal Reserve Bank on Tuesday, to be replaced by Ben Bernanke.

And in an unrelated calendar occurrence, we are now in the Year of the Dog.

But enough of all that. I have a strange gold bar story to tell.

The story begins about three weeks ago. I had a phone conversation with a stranger back east, concerning a 6-pound gold bar that he had possession of. It seems that this bar came from outside the US, I forget exactly where, and he desired to turn it into cash.

I explained our usual procedures for buying gold bars from unknown refiners, that we would drill the bar first, and, if the shavings looked promising under the application of a dilution of nitric acid, then we would forward the bar to our refiner, and, about six days later, pay the owner of the bar based on a complete liquid fire assay.

This was satisfactory to him, but the idea of getting the bar to us via Registered US Mail, or through an armored bonded carrier, did not strike him as prudent. No, he informed me that he would bring the bar to us personally.

I didn’t think much of the conversation, nor of the follow-up call I got from him, telling me that he had other business in the Southwest, and would be here the next week. To say the least, the gold business has been running at record levels lately, and one more phone call about gold to sell, particularly one that didn’t end with a confirmation of shipping, didn’t make much of an impression on me.

But this past Thursday, I received another phone call from this young man – he was in Phoenix, at a hotel a few miles away, and wondered if it was a convenient time to bring the bar around for inspection. As he had called originally from 2,000 miles away, I was more than a little surprised that he had made the trip. I told him to come on by, and asked him about his flight, only to be told that he had driven the 2,000 some odd miles in his car.

About an hour later, a man, in his thirties by my guess, in a dress shirt and tie, walked into our store bearing a gym bag. We exchanged introductions, I recognized the southern accent I had heard on the phone, and he pulled a heavy object wrapped in a chamois cloth out of the bag.

As soon as the bar was unwrapped and on our counter, I knew we had a problem. The bar, which was supposed to be pure gold, was much too brassy-yellow. It had smooth tapered sides, and the bottom of the bar was textured, with a serial number neatly inscribed thereon. No weight or maker was indicated anywhere. Most strikingly, the figures 9999 were on the bar’s top in big bulbous letters, giving it the appearance of a gold bullion bar as conceived by Peter Max back in the 1960s.

I didn’t say anything, but lead the bearer of the bar over to a table where we have a slate and a row of bottle bearing the various acid dilutions used to test gold. I took a piece of 14 karat jewelry out of our scrap bucket, and demonstrated how we rub the piece on the slate, and then put drops of various acid solutions on the mark the piece makes on the slate. This is the ‘acid test’ for gold, a technique known to the ancient Egyptians and still used by us old-fashion gold dealers today.

In the acid test, the mark of a piece to be tested is subjected to various dilutions of nitric acid to see if there is any gold present, and if so, is it 10k, 14, 18k, 22k, or even pure gold, which is 24 karat.

Having explained all this to the young man, I took the heavy bar and scraped two places onto our slate, each of which left a yellow mark on the stone. I then applied 14k acid, and also 10k acid. The 14k acid dissolved the mark immediately, indicating that it was nowhere near 58% purity, and after a few seconds, the 10k acid did the same, indicating the absence of gold of even 41% purity.

The whole process took two minutes, tops, and the young man stared at the results. He had said very little as I lead him through the demonstration. Finally, he whispered tensely, “I paid $40,000 for that bar.”

After a moment, he said, “And the man who sold it to me is out in the car. Would you mind if I left that bar here a minute while I go get him?”

“Sure,” I said, or something equally lame. I had just witnessed the realization of the loss of $40,000 by a man who had seemingly driven 2,000 miles to find that out. And now he thought that he was going to return to his car and fetch the man who sold him the bogus bar.

My immediate thought was that that wasn’t going to happen. I felt like I had seen this movie before, and the man who took this guy’s $40,000 was not going to be outside waiting patiently in the car, but long gone. Why would a scamster stick around for the ultimate revelation of his scam?

I was feeling a little tense myself, thinking about what might happen, and that maybe there was some aspect to this deal that I hadn’t thought through – perhaps something truly ugly was about to go down. I thought about grabbing one of our pistols hidden nearby. I thought of the possibilities of rage, revenge, and irrational behavior for quite a few minutes.

The young man with the bar was taking a long time out there. Did he go out to the car, his companion wasn’t there, and he was searching frantically? Or was there a fight going on in our parking lot? Were both, or either, of them, actually coming back? And why was it taking so long? I just stood there, next to the brassy bar on the counter, wondering and waiting. And waiting.

After the longest five minutes of my life, the young man came back into the store, followed by a much older man in casual dress. The older man seemed nonchalant, taking his time to ponder the coins on display, and only slowly make his way to the back of the store where the slate was. He didn’t make much eye contact with me. We skipped the formal introductions.

I walked the older man through the same demonstration with the bar and the acids. He had on a 24k gold ring, and I rubbed that ring on the slate, put the acids on it, and of course, the pure gold in his ring held up to all the acids, whereas the gold bar did not. The acid test is really a simple one, and on their 2,000 mile journey, our two travelers must have driven within a mile or so of dozens of ordinary pawnshops that could have told them the same thing that I did.

After the demonstration that I conducted for the benefit of the older man, the young man thanked me with a handshake, and off they went.

A few questions about this odd little episode come to mind. Why didn’t the older man notice before that the bar was not the same color as his ring, which he knew to be 24 karat? These two had just made a cross-country trip together in a car – were they related? Did they live in the same town? And, now that they were convinced that the bar was a phony, what was going to come of the young man’s $40,000?

Like I said, there are a lot of things about this incident that I will never know. But I do know that gold, the quest for gold, and what I guess we have to call the mystery of gold, makes for some very good stories.

A surprising number of them are actually true.

-Richard Smith

 

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