by Simon Black, Sovereign Man:
Some time in the mid 3rd century BC, King Hieron of the ancient Greek city-state of Syracuse (in modern day Sicily) ordered a local goldsmith to forge a new, beautiful, golden crown.
But when Hieron was presented with the crown, it didn’t feel quite right.
The King suspected that the smith had put some of the gold in his pocket, and instead fashioned most of the crown out of lesser metals. But this was just a suspicion. He needed proof.
So he approached the smartest scientist in his kingdom– Archimedes– and asked him to figure out whether or not the crown was actually made of pure gold.
Archimedes pondered the problem for weeks, frustrated that he couldn’t figure out a way to determine the crown’s purity.
And then one day, as the legend goes, Archimedes stepped into a public bath and noticed that the water level rose based on how much of his body was submerged in the tub.
He experimented over and over with this observation, plunging different substances and metals into the water to see how much the water level rose.
Eventually Archimedes was able to determine that different metals have different densities. Gold, for example, has a density of 19.3 grams per cubic centimeter. Copper’s density is less than half of that.
And because they have different densities, the same volume of submerged metals will cause the water levels to rise at different rates.
Based on this principle, Archimedes would be able to determine that the crown was NOT made of pure gold, and that the goldsmith had swindled the king.
According to the ancient Roman scholar Vitruvius, after making this discovery, Archimedes ran completely naked from the bath house out into the streets of Syracuse shouting, “Eureka! Eureaka!” (I have found it!)
History does not tell us what happened to the crooked goldsmith, but we can imagine the king was displeased.
And it certainly wouldn’t be the last time that anyone tried to swindle people when it came to precious metals.
Just a few days ago, in fact, the banking giant JP Morgan was fined nearly $1 billion for illegally manipulating precious metals prices.
It turns out that, for at least six years, several traders at JP Morgan were engaging in ‘spoof trades’ of precious metals. Essentially that means they were booking fake trades for the sole purpose of manipulating gold and silver prices to their advantage.