CFTC Investigating London Gold, Silver Price Fixing Manipulation

Years after the CFTC, under the leadership of Goldman’s Gary Gensler agreed - somewhat theatrically - to investigate whether the price of precious metals was manipulated during trading, the commodity futures regulators are once again taking a look at shady activities originating at London. Or rather, it is “discussing internally” whether the daily London Gold and Silver price fixing is open to manipulation.

We are confident that this latest noble CFTC effort will be for naught: after all wholesale market manipulation like that of Libor and the energy market, is only contained to those sectors. It is preposterous and inconceivable that bankers, anywhere and especially in London, would be tempted to intervene illegally and push gold prices lower. After all, it is not like a surge in gold and precious metal prices is indicative of a loss of faith in the status quo and fiat money, hence an embedded status quo oligarchy would have an interest in keeping precious metal prices lower. Which is why we urge the CFTC to promptly forget this latest charade, and to focus on much more productive things: like ignoring the creeping takeover by HFT of all commodity markets, and complaining to Congress about its low, low budget.

The Commodity Futures Trading Commission is holding internal talks whether the daily setting of gold and silver prices in London is open to manipulation, according to people familiar with the situation.

No formal investigation has been opened, the people said. The CFTC is examining various aspects of the so-called price fixings, including whether they are sufficiently transparent, they said.

Gold prices are set twice daily by five banks via teleconference, while three banks set silver prices. The fixings are then used to determine spot prices world-wide, including jewelry and sales from mining companies to refineries. The prices also help determine the value of derivatives tied to the metals.

The London gold market fix dates from 1919, and now sees twice-daily conference calls involving units of five banks: Barclays, Deutsche Bank AG, HSBC Holdings PLC, Bank of Nova Scotia and Société Générale.

Spokespeople for Barclays, HSBC and Deutsche had no immediate comment. Representatives from the other two banks couldn’t be reached.

The silver fix, dating from 1897, involves Scotia, Deutsche and HSBC.

“[The fixings are] not arbitrary, it’s very much done on a demand supply basis until a price is reached. It’s fully transparent, nothing like Libor,” said a spokesman for the London Bullion Market Association, the trade organization that sets the standards for the quality of gold and silver traded in the London market.

Well that settles that, because in a world in which any real assets are the biggest scarcity, would those who have direct and constant access to money created out of thin electrons, prefer to quietly accumulate gold, physical gold and not its paper manifestations, in order to preserve their wealth - at low or high prices?