China's fake gold scandal

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In a recent development, which would spark a brief wave of outrage among physical gold holders, China's Wuhan-based Kingold Jewelry Inc has been accused of depositing fake gold bars as collateral to obtain loan worth 20 billion yuan ($2.8 billion) from 14 Chinese financial institutions, mostly trust companies (also known as shadow banks), over the past five years, as per a report in Zero Hedge.

As per the report, the company used 83 tonnes of gold bars as collateral and insurance policies to cover any losses but many of them have turned out to be gilded copper. This has left creditors holding the collateral for the remaining 16 billion yuan of loans outstanding against the fake gold bars.