December 3rd, 2010
04:08 AM GMT
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Hong Kong, China (CNN) – Alarm bells rang in Hong Kong's gold industry this week when it was discovered that several well-known jewelry stores were duped into buying fake gold.

Scammers always lurk about the precious metal, but these criminals seemed to go the extra mile. Normally, a jeweler will inspect scrap gold by literally scraping the gold and heating it. If the gold changes color, that's a red flag that it’s faux.

In this scam, the fake gold was a mixture of about 50% real gold bullion and 50% different alloys like copper, iron and rhodium.  When jewelers heated the fake gold to test its authenticity, the color did not change.

"It may not be high-tech, but it is sophisticated, for sure," Haywood Cheung, President of the Chinese Gold & Silver Exchange Society, told me. Cheung added he does not know how the scammers were able to manipulate the alloys to keep its gold appearance under heat.

The fake gold nuggets and gold scraps looked real because it was coated with pure gold, Cheung said. Jewelers did not discover the fraud until the metal was melted down and irregularities appeared.

Cheung estimates jewelers lost about HK $2- 3 million (US$260,000-$387,000) because of the scam. As a result, local jewelers will take more skeptical look at gold brought in for resale. One extra measure could be cutting the metal in half for inspection, Cheung said – a process sellers typically don’t like.

How can consumers be sure gold objects they buy are real? Cheung says jewelers have identified the fake gold before sale, so jewelers do not risk their reputation by claiming the faux gold is real.   "(The situation) affects the industry more than it affects the public for the moment. It does not affect the public because … the jewelers, the goldsmiths, will absorb the cost of the fake gold."

The demand for gold in China has been voracious. China imported four times more gold so far this year than last year.

Gold is traditionally a safe haven for investors and demand soars when there's uncertainty in global markets. Gold prices keep hitting record highs and hovered over $1400/ounce for the first time in early November.

soundoff (22 Responses)
  1. JDoane

    gold is expensive

    December 3, 2010 at 7:47 pm |
  2. Oladipo Akinyemi Omole

    Greetings Pauline and compliments of the season.I'm really surprised or rather astonished that faking of gold or any other precious metal can happen in developed economies like China.What's happened to the jewelers?Cheers.
    It's me,

    December 4, 2010 at 2:38 am |
  3. DD

    I understand the issue for the jewelry stores here, but is the incentive for the scammers that great?

    At best, they double their money by buying 100% gold and selling it in 50% alloys. But when you include the cost of the other metals, the expense involved in what seems to be reasonably complex metallurgy, and whatever additional overhead (shipment, bribes, etc.), I can't imagine they take home more than 20-30% profit. I assumed criminals looked for bigger margins, especially when risking Chinese criminal justice.

    December 4, 2010 at 3:09 am |
  4. Ferdinand

    Absolutely they are fake, i am one of a countless victim of this scam.
    i am a tourist in a group, the organizer will drop you (tourist bus) at the jewelry making shop and enticed you to buy from the jeweller.
    i bought 2 necklace and one ring.

    They will give you certification in Chinese language that you cannot

    beware to them especially when you go nearby china boundary. they are all fake.

    December 4, 2010 at 4:24 am |
  5. steven

    Tell me something that I don't know about China.
    China is an expert in mimicking, fabricating and copying AND faking goods and the goods I mean anything and everything.

    December 4, 2010 at 9:01 am |

    Check out the new Versace V9 luxury mobile phone, featuring metallic housing with Swarowski crystal stone, shake control, turn-to-mute, blacklist functions and 2000 mAh battery. Available in gold or silver for only EUR 135 on

    December 4, 2010 at 10:21 am |
  7. mjs

    50% gold is not fake gold.

    If its not 100% gold then they must say so

    December 4, 2010 at 10:59 am |
  8. giorgio serafini

    Le falsificazioni dell'oro che risultano alla fusione,viene a rivalutarsi il dollaro e le altre monete forti.

    December 4, 2010 at 12:15 pm |
  9. Dan

    December 4, 2010 at 12:17 pm |
  10. CuriousGuy

    Those sellers should have done a simple density test. Iron, copper and rhodium have lower densities than gold.

    December 4, 2010 at 3:14 pm |
  11. Kilauea/Ariiteuira

    and it's only the beginning!!!!the scammers are always present where the"money,cash,green" is..Today this scam is discovered but I will not be surprise if they tried the same scam for white gold , etc....I love China....,but unfortunately it's also NUMERO UNO for counterfeit items!!

    December 4, 2010 at 4:46 pm |
  12. Gerardo Barrica

    We should have all our eyes towards China. She can fake anything and she is out to conquer the world economically.

    December 5, 2010 at 10:22 am |
  13. Stargoat

    What a shock. Someone in China is taking an inexpensive item by lying to make it expensive. We've never heard of that before, right? (Milk, toothpaste, dog food, children's toys, sea food, etc)

    There's a reason that people in China prefer to purchase goods not made in China.

    December 5, 2010 at 1:47 pm |
  14. Steve Thompson

    This article shows just how much gold China is consuming:

    December 6, 2010 at 12:25 pm |
  15. Tom

    What hasn't been addressed in China is that gold is not really an investment. I was working with an economics teacher in a small Chinese college and he was explaining to me that gold prices only go up. Given that China has imported 4x more gold this year, it might be an indicator of a "gold bubble."

    December 7, 2010 at 12:58 am |
  16. Ashok Goyal

    Jewelers could have taken precautions and done more rigorous testing. And this is not new – I believe that enormous amount of cheating happens in the diamond trade where synthetic diamonds are being posed as real ones.

    December 7, 2010 at 8:40 am |
  17. Nulle

    Synthetic diamonds are still diamonds....they could do a electrical test or Chemical test on drilled samples ( small hole) to verify...not surprised what Chinese trying to scam whenever possible

    December 9, 2010 at 9:02 am |
  18. Dave

    Concerning to say the least as I wonder how much of this passed through to consumers. Hong Kong gold is the standard in Asia for 24K jewelry and normally is priced very competiively. We travel there regularly to purchase Jewely as it is much cheaper there than in the Philippines or other areas in Asis


    December 10, 2010 at 4:57 pm |
  19. US lover

    do you know where the counterfeit makers get their raw material often times? From the trash and e-wastes US dumps on China's land and along China's shores for cheap waste dispositions and processing, so that people can live in an un-polluted environment over here .

    December 10, 2010 at 6:28 pm |
  20. Matt Dryer

    The (real) gold and metal industry is very impressive to this day at just how efficient they are still able to be even in a somewhat down economy... I would like to see those business plans because they seem to be working... the scam artists are just not as intelligent as they real minds behind the industries success... I started a company just to make sites and stores for the legit companies... coming from someone who would know someone should check it out and see if they would use or wouldn't...

    December 11, 2010 at 6:07 pm |
  21. Abdan

    OR..the government could step out of the way of inaiontvon and allow us to create a sustainable world that could continue to grow without major lack and scarcity..there is more than enough resources if we use them properly basically we need to get rid of the fed..they confuse real wealth with paper mache' and since they can over-print, we over-produce, over-consume and we waste a ton of real wealth we need to stop pretending wealth comes from a printing press and take care of ourselves

    November 3, 2012 at 5:10 pm |
  22. Maryln Northcut

    Jewellery may be made from a wide range of materials, but gemstones, precious metals, beads, and shells have been widely used. Depending on the culture and times jewellery may be appreciated as a status symbol, for its material properties, its patterns, or for meaningful symbols. Jewellery has been made to adorn nearly every body part, from hairpins to toe rings.`-"..

    With best regards

    May 21, 2013 at 12:02 pm |

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