By TLB Contributor: Susanne Posel
The Department of Justice (DoJ) and the Commodity Futures Trading Commission (CFTC) have joined forces to investigate the rigging of precious metals such as gold and silver by large multi-national banks on the global exchange.
Global banks are being accused of “manipulating [the] precious mental market” to gain bigger profits from trading commodities including:
Because these commodities are highly valued across the board in financial and retail institutions, the price setting process is most vulnerable (and apparently was used) to make extra billions for bankers with the “century-old method of one or two conference calls per day between groups of bankers.”
The banks involved in this price setting are:
• HSBC Holdings
• JPMorgan Chase & Co
• Credit Suisse Group
• Deutsche Bank
• Goldman Sachs Group
• Bank of Nova Scotia
• Standard Bank Group
In 2014, Barclays was fined €26 million “for failures in internal controls that allowed a trader to manipulate the setting of gold prices” by the Financial Conduct Authority (FCA) in a statement .
Daniel James Plunkett, a trader and director of precious metals for Barclays, was fined €95,600 “for exploiting weaknesses in the banking system.”
In that same year, , Kevin Maher filed a lawsuit in the US District Court in Manhattan, New York against Société Générale, Deutsche Bank, Barclays, Bank of Nova Scotia and HSBC for colluding to and enacting manipulation of gold prices and futures.
Rosa Abrantes-Metz and Albert Metz drafted a document to explain how this sleight of hand is accomplished.
The procedure is as follows: “Unusual trading patterns around 3 pm in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behavior.”
Metz wrote: “The structure of the benchmark is certainly conducive to collusion and manipulation, and the empirical data are consistent with price artificiality. It is likely that co-operation between participants may be occurring.”
Indeed, the 5 banks named in the lawsuit would have been in concert with one another to ensure the manipulation of the gold prices appeared to be legitimate.
The manipulation of benchmarks is being investigated internationally to understand how trillions in gold can fluctuate as it appears to on the global markets.
Ross Norman, self-proclaimed expert gold trader and chief executive officer for Sharps Pixley Ltd. decried that this manipulation is not actually what it appears.
Norman asserted: “The price fluctuations for gold when five banks meet daily to determine the so-called fixing in London are a consequence of supply and demand, not a sign of manipulation.”
The veteran broker of 30 years said: “The bigger price swings in the afternoon are caused by both London and New York being open and more people trading bullion because of increased liquidity as the so-called fixing happens, said Norman. The volatility also reflects differing views on the value of metal rather than price manipulation.
The fix is a price-discovery mechanism where you’re trying to match buyers and sellers and as such price volatility is a natural and even desirable part of that process. It’s natural that you’re going to get these sharp movements. I don’t accept the assertion that the structure is inefficient and open to manipulation.”
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