A month-old, and very hard hitting, article by Tyler Durden of Zero Hedge, has new relevance given the make-up of the initial six direct participants in the LBMA Gold Price benchmarking system as all of them have been reported as being under investigation by the U.S. Department of Justice for possible gold price rigging.
We make no apologies for re-examining a month-old article from Zero Hedge given the recent selection of the six banks now involved in the new London gold benchmarking process. Never one to mince his words, Tyler Durden of ZeroHedge really climbed into whether the gold market is rigged, and if so (he reckoned it is beyond doubt that it is), who is doing the rigging. The answer: virtually everyone with the financial clout to get involved.
In an article on his website published a month ago entitled: Ten Banks, Including JPM, Goldman, Deutsche, Barclays, SocGen And UBS, Probed For Gold Rigging he pointed the finger at almost every major Western banking name out there – and by implication most of the rest of the Western World’s top banks would also be involved too. Whether the big Chinese banks are also implicated is not stated – but a cynic might conclude that if they are not, then that is perhaps why they have been excluded as Direct Participants in the new London Gold Fixing process – See: Is the new LBMA Gold Price just another Fix? .
Durden commented in his article: “the rigging in the gold market, rigging which involves every single central bank and High Frequency trading outfit is now a proven fact” and pointed to incidences of major banks already having had to pay fines for gold price rigging – but without admitting guilt – and thus tarred virtually all the others, and also the major central banks, with the same brush. (Perhaps including all central banks was a step too far, but just those which can have a major impact on the gold price would make the point!)
Durden noted that the U.S. Department of Justice probe into gold price rigging was believed to involve investigation into the activities of the following major banks in this respect: Bank of Nova Scotia*, Barclays*, Credit Suisse Group, Deutsche Bank, Goldman Sachs*, HSBC*, J.P. Morgan Chase, Société Générale*, Standard Bank Group and UBS*. What must be alarming to an outside observer is that all six banks (designated by a * above) selected to handle the new LBMA Gold Price benchmarking process in London are among those reported to be being investigated for gold market rigging
However, like the similar European investigation into precious metals market rigging, Durden obviously does not really expect the U.S. DoJ to find any wrongdoing – or if so only to give the bankers, or some of them, a financial slap on the wrist which in reality will not make the slightest dent in their earnings. Why? Because like the similar European ‘probe’, which was dropped, it could likely implicate virtually all the major banks and reveal a manipulation cartel rivalling, or even exceeding, that exposed in the recent Libor probe. “And once traders at the commercial banks turn sides and squeal for the prosecution, well then it would be the central banks’ turn next. Which is why it was imperative to bring the European investigation to a quiet end” Durden commented. By implication the U.S. probe will end similarly.
Durden obviously writes from a specific ‘gold price is manipulated’ viewpoint which is dismissed by much of the mainstream analytical community, but he would argue that the naysayers are all part of the global financial establishment and would support the status quo anyway.
There certainly is sufficient evidence already out there that at least ‘some’ banking entities, or their employees, have already been found out in attempting to manipulate the gold price for their own ends. As to whether they have all been ‘at it’, and in concert, is probably going to be impossible to prove – if indeed the regulators will even try that hard to do so! If Durden is correct, the manipulation runs so deep that for the regulators to do anything more than come up with a judgement so mired in technicalities that it, in effect, finds no blame accruing to the banks is virtually a foregone conclusion. To do otherwise and find the banks guilty could unleash such a global financial can of worms that it could shake the foundations of the whole capitalist system.
Of course Durden could just be one of those he refers to in his article as who believe that the gold market (not to be confused with Libor or FX) manipulation only exists in the paranoid delusions of a few tinfoil fringe-blogging lunatics. But like many others of this brigade he does come up with some worrying facts which would tend to support his viewpoint. The banking establishment would no doubt argue that these are all taken out of context and there is no evidence of any manipulation at all. And would point to the European probe, and if Durden is correct any forthcoming findings of the U.S. DoJ probe, as proving their point.
But do have a read of Durden’s article as linked in the first paragraph above and make your own assumptions. It did, at the time, raise some very interesting questions as to the possible conduct of the global financial establishment. Most recently, as noted above, it would again call into question the selection of the direct participants in the LBMA Gold Price benchmarking process, although one doubts that, even if he is correct in his views and suppositions, much, if anything, will change in the near future!