Beware of Internet Silver scam

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Published: Wednesday, 04 August 2010 13:53

Published on: July 24, 2010 at 16:00
By Dr Jeffrey Lewis

With silver attracting headlines, cult-like following, and higher prices, silver investors should be on high alert for a scam being perpetrated on the internet. Newly minted fake coins are finding their way from Chinese counterfeiters to Ebay and then to investors who unknowingly purchase $20 rounds that are in reality only a few dollars worth of metals. As prices tread higher, these scams will only continue to grow in their influence. Here's a simple guide to evaluate silver, and whether or not it is indeed real:

Does it Look Right?
Any coin shop owner or worker should be able to tell immediately whether or not your coin stacks up as a real silver coin. One of the best ways to see if it is in fact silver is to flick it with your fingernail. For larger, 1 ounce coins, the silver coin should set off a high pitched ringing nose. Now smack your fingernail against another coin, preferably one of nickel-clad. You'll find the noise is short, not as high-pitched, and about as dull as the metals in it.
What Does it Weigh?
Counterfeiters are in the business of making look-alikes, but not perfect coins. One of the most fool-proof ways to see if your coin is legitimate is to weigh it. Coins that are counterfeited will have a weight that varies greatly from standard. Measure it too, as the coins size may be too thick or too thin to be issued by a mint.
Check the Edging
Many national mint coins have a reeded edge; that is, they have bumps all around the edge of the coin. Those coins that don't should be inspected more intensely, especially those that are not supposed to have the reeded edge. Without the reeding, it is far easier to counterfeit a coin. Look for edges that imply the coin was stamped out of two halves – which is an instant red flag and a popular process among counterfeiters.
Know Your Source
Of the three above tips, none is more important than to know the person from whom you're buying your silver. Most, if not all, fraudulent silver coins have been sold anonymously over the internet. Brick and mortar sellers don't have the same leisure of anonymity and aren't interested in losing their business and credibility over scamming a few hundred dollars, whereas fraudsters can open new businesses for a fraction of the benefit of one fraudulent sale.
You should also be privy to the mint or operation that is making the silver rounds you wish to purchase. Previously, investors could be sure that small coins and rounds were free of impurities or cheaper metals due to their size; however, as silver explodes in price, so does the opportunities for profit in making fraudulent silver coins.
As with any financial instrument, you're best to purchase face to face from someone you know and a vendor with an established reputation for quality products. While most scammers operate online, not all online vendors are shams, and most with their own dot com are in it for the long run, which means a clean operation.