For any BullionVault fans out there (like me), this is their response to me asking whether it's possible for tungsten cored bars to be passed around in the "Good Delivery Circuit" and thereby me owning one. I would have thought that Central Banks were part of the good delivery circuit, but what the hell do I know... BV poo poos the whole idea anyway...
Thank you for your email. As you know, we send independent assayers into the vaults every year to check all the gold bars, and they send their report to our auditors who publish it – on their website – with the full financial audit.
To read the Assayer's Report
Last year, the assayers were 100% satisfied with every bar. They are now due to return to the vaults later this month, coinciding with our 2009 financial audit. Meanwhile, we only ever accept bars from accredited vaults and refiners, and anyone who delivered us a gold bar which later turned out to be bad would be liable for the loss.
On top of that, we guarantee every gram of BullionVault gold ourselves:
With regards to the alleged tungsten fraud, such fakes could perhaps circulate outside the Good Delivery circuit. But it's unlikely that any such metal could ever make it into accredited storage.
Accredited custodians only take in bars from other accredited vaults, and metal only enters the system from accredited refiners. Even when they bear the correct bar stamps, large gold bars are not usually accepted from people outside the Good Delivery circuit, which is why taking a Good Delivery bar into private possession seriously dents its value. Any potential buyer, lacking the accredited storage history which ensures integrity, would rather deal accredited metal from an accredited source. It's this warranty -- that delivery is good -- which makes the professional wholesale market cost-efficient and liquid.
You can learn more about Good Delivery at the London Bullion Market Association (LBMA)'s website. You'll note just how exacting the criteria for refining and assaying are:
The Physical Committee's detailed work on weighing scales is also worth reviewing. Because at these tolerances, the difference in density between gold and tungsten would show in a 400-ounce bar. Their very different melting points (1064°C for gold, 3422°C for tungsten) also make the alleged fakes unlikely, as do their physical states when cooled (gold is soft, tungsten brittle). Following back along the chain of integrity – the formal history of who held the bars, when, and in which approved facility – would ultimately lead to the producing refiner, and no amount of "tungsten" fakes would be worth the law suits, let alone the loss of LBMA accreditation.
As regards the rumours and stories themselves, "Impeccably reliable sources" would never tell an internet blogger that "a number of well-heeled market participants bought...gold futures on the London Bullion Market (LBMA)". Not because they wouldn't want to share such information, but for the simple reason that London dealers don't offer gold futures. Spot, forwards and options, yes. But futures, no.
Nor can anyone trade gold "on" the LBMA, because it is a trade association, not an exchange or the market itself. Nor is gold dealt at the London Metals Exchange (LME) as some authors state. It offers base-metal contracts.
Reliable sources of information would know this. They'd at least look it up before publishing.