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Are Big Banks Manipulating Precious Metal Prices?


Recently, I received an email from one of our clients detailing why they feel silver prices are sure to explode. One of their reasons was a government investigation into some of the world’s largest banks for precious metal price manipulation.
 
Indeed, there have been investigations by European and U.S. regulators since early 2015. Initially they looked into currency manipulation and then expanded their investigation into other markets including precious metals. According to Bloomberg.com “ The U.S. Justice Department is investigating whether the world’s biggest banks manipulated prices of precious metals such as silver and gold as it pushes to wrap up probes into currency-rate rigging, according to people with knowledge of the matter.” (“ Banks Face U.S. Manipulation Probe Over Metals Pricing” 2015). The banks under investigation in the metals probe include Credit Suisse, UBS, Goldman Sachs, Societe Generale SA, Bank of Nova Scotia, and Standard Bank Group Ltd.  

The key here is that the initial investigation was into currency manipulation and not precious metals. Most likely the regulators said to themselves, “hey we’re here anyway, why not look around.” The fact is, big banks have been sued for years by investors as well as the jewelry industry for alleged price fixing. However, the only case I found involving a bank actually guilty of price fixing is Barclays. A rogue trader artificially suppressed the price of gold in 2012 by using fake positions. Barclays was ordered to pay $44 million pounds because of this. (“ Barclays slapped with $44 million fine over gold price fix ” 2014). On the flip side, JP Morgan won a Federal Appeals Court ruling in 2014 with the dismissal of a complaint brought by investors claiming price manipulation. The ruling was that the investors “failed to plausibly allege even a tacit agreement to manipulate prices.” (“JPMorgan defeats appeal in U.S. silver price-fixing lawsuit” 2014).

I’m no lover of the big banks. They certainly have been guilty of massive levels of unethical, if not illegal behavior regarding mortgages and currency. However, I simply can’t find any indication of them being involved in collusion or manipulation of the precious metals markets.

Posted by on 23rd January, 2016 | Trackbacks
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