China's latest export boom: Fake gold coins

As investors become increasingly nervous about the stock market, the price of gold has been swinging up, rising roughly 20 percent since just the beginning of the year. But if you buy your gold in coin form, you need to be wary. Chinese crooks are minting fakes in large quantities and selling them on the Internet.

And unlike the fakes of yesteryear, which were often made of precious metals but altered to appear more rare, many of today's fakes are coins that are commonly sold for their precious metal content. But these are constructed of cheap alloys like tungsten, lead and zinc, with just enough gold to give them color.

"The average person probably would not be able to tell the difference between a real coin and a counterfeit," said Mike Fuljenz of Universal Coin and Bullion in Beaumont, Texas. "They can get fooled by even a bad fake because they don't know what a real one looks like."

That's particularly true of coins sold via the Web. Some of the coins are extraordinary artistic copies made with lasers to exactly replicate the look and shape of the real coin. And they even come in packaging that makes them appear genuine, Fuljenz said. However, coin dealers can typically tell a bogus coin by its weight, color and how it reflects light. These factors are difficult -- often impossible -- to gauge remotely.

And fakes are pervasive.

"There are hundreds of thousands of these things," said Scott Schechter, vice president of Numismatic Guaranty Corp. "They're just everywhere."

Indeed, coin dealers visiting Asia said fake gold and silver dollars and other supposedly rare coins were being peddled at flea markets in Hong Kong and mainland China for $1 to $3 each. Trade publications have noted that back-street factories in China are busily making thousands of copies of popular coins such as the American Silver Eagles, Canadian Maple Leafs and U.S. Buffalo coins. They're then marketed by Asian coin dealers or even resold through eBay (EBAY) or Craigslist.

The buyer's only tip-off may be that the price is simply too good to be true, said Schechter. A real gold coin will sell for the spot gold price, plus a $50 to $60 markup, he said. If it's selling for less, know that something is probably amiss.

Indeed, in today's counterfeit-crazy market, it's best to buy in person from an established dealer you know and trust. That way, if you suspect your coin has a problem, you can return it -- or sell it to another dealer for the value of the gold. Any reputable dealer will pay at least the spot price of the metal in a real coin, Schechter added.

If it's a cheap Chinese fake, however, it's probably not worth the tungsten it's printed on.