Lawsuit Claims Gold Price Is Manipulated
By Rob Bates, Senior Editor
Posted on March 6, 2014
A new class-action suit targets the five banks that participate in the daily determination of the London gold price, charging that the metal’s value is being set by “an artificial and manipulated market.”
The suit, filed March 3 in New York Federal Court with COMEX trader Kevin Maher as lead plaintiff, charges that the five banks—Bank of Nova Scotia, Barclays Bank, Deutsche Bank, HSBC, and Société Générale—who set the twice-daily gold fix are abusing their position and profiting from their involvement.
The legal papers cite analyses that “unusually large price spikes” in gold are consistently occurring during the afternoon price fix, and these are not explained by news or other events. This pattern did not happen, it says, prior to Barclays taking over as chairman of the group in 2004.
It notes that United States and European regulators are increasing their scrutiny of the pricing mechanism, possibly leading Deutsche Bank to withdraw its participation.
The banks set the London gold fix twice daily via teleconference, in a ritual that dates back to 1919. A similar mechanism exists for silver.
The suit charges restraint of trade, undue enrichment, and several other charges, and seeks unspecified damages. The proposed class, it says, might include anyone who bought and sold gold or gold options.
Bank representatives could not be reached for comment but told Reuters the charges were unsubstantiated, and the suit had no merit.