Gold Price Manipulation Reaches Mainstream Media

If 2013 was the year of the big crash for gold, then 2014 could become the year of the truth for gold, evidenced by the attention that gold manipulation is getting in the mainstream media.

Case in point: lawsuits against the Gold Fixing bullion banks started yesterday in New York. The NY Times reports the following:

At a 40-minute hearing, lawyers for more than 20 plaintiffs gathered in Federal District Court in Manhattan to coordinate their linked lawsuits against the five banks that make up what is known as the London gold fix. The suits, filed by hedge funds, private citizens and public investors like the Alaska Electrical Pension Fund, contend that the banks have used their privileged positions as market makers to rig the price of gold to their benefit.

As a reminder, five banks (i.e., Barclays, Scotiabank, Deutsche Bank, HSBC and Société Générale) are “agreeing” twice per day on a gold price, during the London Gold Fix. The banks are in a priviliged position to take advantage from the price they set (also via derivatives trading). Since the LIBOR scandal, the accusations have become more “accepted”, while it was “unconventional” in the past.

The NY Times continues:

The lawsuits — and there are still more being filed — center on two main aspects of the gold fix: the fact that it is unregulated and that member banks can trade gold, and gold derivatives, during the call.

“The gold fix is by its very nature not transparent and therefore vulnerable to conspiratorial and manipulative behavior,” one of the suits maintains. The suit claims: “The lack of prohibition against trading during the calls allows defendants to gain an unfair trading advantage because pricing information exchanged during the calls provides them with insight into the immediate future direction of gold and gold derivative prices.”

As a reminder, we have reported extensively in the past, on a factual basis, that gold price manipulation was visible in the charts. Based on his statistical research, Dimitri Speck concluded that central banks started to influence systematically the price of gold as of August 1993. His conclusion comes in particular from his intraday statistics, where he observed several anomalies. First, since 1993, the price has been falling systematically during the trading session of COMEX in NY. Another trading anomaly is that during the PM fix the price systematically tends to drop significantly. The following chart is the result of some 16 years of recording intraday data. The sudden price drops are so sharp and systematic, that it can only point to intervention.

Besides, it appears that manipulation in the futures market (visible in the COT reports) comes on top of the revelations on the intraday charts. The point is that the interventionists increased significantly their activities in the futures gold markets in May 2001, what is visible in the COT report. Before that, the price was more suppressed through selling and leasing of gold. As soon as the futures markets got into play, an increasing number of price shocks have appeared with an increasing intensity. Obviously those price changes were mostly drops rather than increases. It becomes clear on the following chart. As of May 2001, the “climate has changed” because of the futures market, which is clearly an anomaly. The decline in the lower part of the chart, that started at that given point in time, shows the net positioning of commercials as a share of total positions. The line is significantly lower, proving that commercials are more on the short side.

So what’s visible on the charts is that, since May 2001, the commercials have reinforced an ongoing trend that started in 1993.

Our point is that the London Gold Fix is just the tip of the iceberg. It is the most obvious way of manipulation, but by digging a bit deeper, one can see, based on facts and figures, how manipulation is much more evident.

Let’s hope that justice finally takes place.

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