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Bloomberg: How to Keep Banks From Rigging Gold Prices

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Today’s AM fix was USD 1192.75, EUR 871.957 and GBP 729.466 per ounce.
Friday’s AM fix was USD 1,195.00, EUR 875.33 and GBP 731.69 per ounce.

Gold rose 0.85% and silver rose 0.74% on Friday. Gold made gains Friday but still finished the week 2.8% lower. Gold fell back below $1,200 an ounce today as technical selling and year end book squaring led to price falls.

Gold in U.S. Dollars, 1 Month - (Bloomberg)

Prices were slightly higher in Asian trading overnight as physical demand picked up in Asia and holdings of the SPDR Gold Trust rose 5.40 tonnes to 814.12 tonnes on Friday - the first inflow since November 5.

Gold in U.S. Dollars, 1 Year - (Bloomberg)

Volumes traded on the increasingly important Shanghai Gold Exchange (SGE) overnight on their benchmark 99.99% pure gold contract were a robust 14.83 tonnes. Chinese premiums edged up $2 - from $16 on Friday to $18 today.

Allegations that banks are rigging the gold and silver markets continue to gain credence and Bloomberg have published an article by Rosa Abrantes-Metz entitled‘How to Keep Banks From Rigging Gold Prices’ (see article including charts below).

Rosa Abrantes-Metz concludes that gold prices may be manipulated and gives evidence to support her assertion. Abrantes-Metz is adjunct associate professor at New York University’s Stern School of Business and a director in the antitrust, securities and financial regulation practices of Global Economics Group.

Falling gold prices despite robust physical demand this year, especially in China, have intensified allegations that gold prices are being manipulated lower. This is the contention of the Gold Anti-Trust Action Committee (GATA), influential blog Zero Hedge and others who contend that bullion banks and central banks may be intervening and surreptitiously manipulating gold prices lower in order to maintain faith in fiat currencies.

It is an important debate and one that has ramifications not just for the gold and silver market but for markets in general and for free market capitalism.

Rosa Abrantes-Metz, Director of Global Economics Group

Abrantes-Metz’s article shows how what was once dismissed as an outlandish “conspiracy theory” and the proponents of the theory laughed at as paranoid tin foil hat wearers, is now not considered quite so outlandish. This is especially the case, given the fact that banks have been found to be manipulating and rigging many markets and governments are openly active in currency and especially bond markets today.

As long ago as two years ago, the assistant editor of the Financial Times, Gillian Tett wrote in that paper that it would be “foolish” to “deride or ignore” the Gold Anti-Trust Action Committee (GATA) and their allegations regarding manipulation of the gold market.

Tett is an award-winning journalist and author and one of the most astute observants of markets and finance in the world today. Yet her article failed to lead to a wider debate and went down the ‘memory hole.’ As many positive gold facts, figures and developments have done in recent years.

Tett acknowledged that central banks intervene in and manipulate interest rates and her article explored whether central banks might also be manipulating gold prices.

“For my money, though, I think there are at least two reasons why it would be foolish simply to deride or ignore GATA, “ Tett concluded. She acknowledged that some of GATA’s points “have at least a grain of truth”.

Gillian Tett, Assistant Editor, Financial Times

“Even if you find it hard to believe that central bankers would be dastardly enough to create a plot – or competent enough to do what Gata claims – the fact is that global commodity markets are pretty murky, central banks are often opaque and western rhetoric about “free” markets is often hypocritical. Those issues merit far more debate, not just among journalists, but central bankers too.”

Abrantes-Metz article is in a similar vein and may signal the beginning of a real debate about the allegations made about gold price manipulation that have yet to be rebutted.

How to Keep Banks From Rigging Gold Prices by Rosa Abrantes-Metz

Authorities around the world are gradually piecing together a shocking picture of how banks have manipulated benchmarks that influence the price of everything from mortgage loans to foreign currencies.

Another area deserves their scrutiny: gold and silver.

In recent weeks, Bloomberg News and others have reported on concerns, among market participants and regulators, that the process for establishing the price of gold may lend itself to insider trading and other forms of unfair dealing. The available evidence strongly suggests manipulation and, given the structure of the market, possibly collusion.

The price-setting mechanism, known as the fixing, provides an easy vehicle for manipulation. Twice every business day in London, representatives of five banks and some select clients participate in a phone call in which offers to buy and sell gold are put forward. These calls determine the morning and afternoon gold fixings, which serve as the benchmark for trillions of dollars in transactions around the world. Silver fixings work similarly, with only three banks involved.

Such direct communication is conducive to collusive pricing, especially when the group of participating competitors is very small. We now know that collusion distorted both the Libor and Euribor interest-rate benchmarks, which involved many more participants. In those cases the coordination occurred through e-mails and instant messages. In the case of gold and silver, an organized live call allows for real-time signaling of the desired prices, obviating the need for additional contacts.

One needn’t look far for a motive. The participating banks all stand to gain both from using the privileged knowledge they glean during the fixing process and from influencing the fixing itself. Aside from trading in the spot markets for gold and silver, they may have significant derivatives positions tied to the benchmarks. The system isn’t set up to identify, let alone deter, such activity. It is the participating banks themselves that administer the gold and silver benchmarks.

So are prices being manipulated? Let’s take a look at the evidence. In his book “The Gold Cartel,” commodity analyst Dimitri Speck combines minute-by-minute data from most of 1993 through 2012 to show how gold prices move on an average day (see attached charts). He finds that the spot price of gold tends to drop sharply around the London evening fixing (10 a.m. New York time). A similar, if less pronounced, drop in price occurs around the London morning fixing. The same daily declines can be seen in silver prices from 1998 through 2012.

For both commodities there were, on average, no comparable price changes at any other time of the day. These patterns are consistent with manipulation in both markets.

It’s extremely odd that the prices of gold and silver are still based on such an archaic and exclusive system. Whether or not authorities seek and find conclusive evidence of manipulation, they should learn the lesson of the London interbank offered rate and reform the gold and silver markets in a way that will deter such behavior. Both metals are highly liquid commodities, so their benchmark prices could easily be set by observing actual trades. To ensure reliability, the process should be overseen by an independent institution with the appropriate governance structure and minimal conflicts of interest.

The best way to restore confidence in financial benchmarks is to remove the means, motive and opportunity for abuse.

It is an important debate as increasingly governments and central banks are distorting financial markets through constant interventions which could lead to the financial system itself being impaired.

In the western world, we have seen interest rates cut close to zero, capital injections and bank bailouts, lending guarantees, saving and deposit guarantees, favouring certain banks and institutions over others, banning short selling and now the latest policy initiative is again bailing out banks but this time bailing in depositors inbail-ins.

At the same time competitive currency devaluations are taking place globally with central banks debasing currencies. We also see outright intervention in currency markets in order to lower the value of national and supranational currencies.

Japan is the glaring example of this and Switzerland’s ‘pegging’ of the Swiss franc was in the same vein. With governments surreptitiously and openly manipulating and debasing their currencies, it would seem logical that some governments might have an interest in not seeing gold and silver prices soar.

Surging gold prices are a vote of no confidence in fiat paper currencies and government and central banks stewardship of these currencies.

This is especially the case with the US dollar as the global reserve currency and all governments have an interest in maintaining faith in the dollar and in fiat currencies which is a possible motive for intervention in the gold and silver markets.

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Tue, 12/24/2013 - 08:44 | 4273050 overmedicatedun...
overmedicatedundersexed's picture

no bank would hold a worthless asset, but then there is all those bank gold vaults, and CDO's listed as assets which one is a real asset? which one will go to 0 first? why does the cb's and imf hold gold at all? Libya's gold is in Libya still NO?

Tue, 12/24/2013 - 06:47 | 4272969 ivars
ivars's picture

Too many international bankers would not like to see how their currency (gold)  moves; its that simple.

Tue, 12/24/2013 - 03:08 | 4272853 MeelionDollerBogus
MeelionDollerBogus's picture

tha goldz is maniperlated, oh my gee, whocouldaknowed!!

Tue, 12/24/2013 - 02:58 | 4272846 ebworthen
ebworthen's picture

"How to Keep Banks From Rigging Gold Prices"

End the FED and the TBTF banks?

Restore sound money.

Roll the guillotines?

Tue, 12/24/2013 - 00:49 | 4272680 Zero Point
Zero Point's picture

Why would I care if they manipulate prices lower?

Doesn't affect my strategy one bit.

Flail away guys, I couldn't give a fuck.

Mon, 12/23/2013 - 22:15 | 4272367 Silver_K-9
Silver_K-9's picture

Demitri Speck - The Gold Cartel

READ It...

Mon, 12/23/2013 - 21:23 | 4272273 Stuck on Zero
Stuck on Zero's picture

I agree that gold trading and everything else is manipulated but this statement referencing the chart is a bit hard to swallow: "These patterns are consistent with manipulation in both markets."

The charts show a part per thousand effect.   One single 3% event during the year could have generated that same result.  I see takedowns constantly at open but the chart sure doesn't illustrate it.

Mon, 12/23/2013 - 20:26 | 4272138 Debeachesand Je...
Debeachesand Jerseyshores's picture

IMHO,PM's are at bargain basement prices.So trade all those USD's for PM's.

Mon, 12/23/2013 - 19:58 | 4272078 hedgelessWhoresMan
hedgelessWhoresMan's picture

What's it cost to get an ounce out of the ground? Around $1300

http://www.fool.com/investing/general/2013/11/20/the-creaping-cost-of-gold-production-is-a-huge-pro.aspx

 

Anybody that thinks POG is not being manipulated (like libor) is as dumb as a box of rocks.

Mon, 12/23/2013 - 19:52 | 4272068 Kina
Kina's picture

What the TPTB did in trying to get gold from weak hands was dumb as.

Firstly the people who went into physical gold did so for a reason and not a trade which is what the TPTB should have first considered. Gold was the insurace against a sysemically sick economy. They should have realised that the gold holders are the ones who have seen behind the curtain.

 

If they wanted to shake physical gold out they either needed to Really repair the economy...or keep the price of gold high. ALL they have done with their games has made it clearer that the gold insurance strategy was right and that TPTB desperate. 

 


Mon, 12/23/2013 - 19:45 | 4272041 Kina
Kina's picture

Just love the anti-gold crowd, many from the MSM and TPTB trolling these sites. And others just fucking butt stupid.

 

But I will sit back and watch these fools rush around trying to buy life-jackets as the ship sinks beneath the water. TOO late - you will drown and I will piss on you as you drown if you happen to be one of those MSM shills.

 

Buying fire insurance after the house has burned down cant be done wankers... the premium has to be paid.

Tue, 12/24/2013 - 02:38 | 4272824 Dan The Man
Dan The Man's picture

But I will sit back and watch these fools rush around trying to buy life-jackets as the ship sinks...

Not even a real life jacket...a "claim" for a life jacket.

Mon, 12/23/2013 - 19:37 | 4272012 Kina
Kina's picture

Why has the the LBMA become so desperate as to try and get gold producers to sell gold down by $400 and essentially bankrupt themselves?

Why have CBs spent decades trying to crush gold and silver?

Why was there a plan .. aka Kissenger... to get the IMF to hold all the worlds CB gold?

Why -An ounce of gold 100 years ago worth $35 USD  is now $1200, and $35 USD basically now fuck all in comparison?

Why the interest and parabolic rise of bitcoin as an alternative to fiat?

Why have the CBs pushed the price of gold below production cost.

Why has China, SE Asia, Asia, Russia gone into hyper gold buying mode?

Why have bullion banks fractionally sold 100:1 gold/silver oz .... ?

What will happen if people even begin to demand a fraction of that bullion in physical?


The Gold Trolls sad little babies, mouths full of bankster semen as ever, shilling, most likely from a well known on-line MSM finance and market site, that is a shill for the banksters and govt.

Mon, 12/23/2013 - 21:52 | 4272332 disabledvet
disabledvet's picture

http://www.youtube.com/watch?v=OPcod8IS214 you're such a dope...riding this thing straight into the ground no doubt. You'd fit in perfectly with the people you attack actually. http://www.youtube.com/watch?v=zJAn-X6p6O0 China, Russia...they're trying to ban paper currency...problem being of course that means they're working for the banks. they've "fooled themselves" into thinking that the dollar is the problem...when in fact it is THEIR dollar that's the problem! Of course who isn't in with the man these days? Now how do we turn that internet thing off again? http://www.youtube.com/watch?v=wvK-iKtkV70 oh, yeah. "it's complicated."

Mon, 12/23/2013 - 19:16 | 4271979 shinobi-7
shinobi-7's picture

"that bullion banks and central banks may be intervening and surreptitiously manipulating gold prices lower in order to maintain faith in fiat currencies."

Isn't it obvious to anyone who cares to look objectively? And how difficult would that be when you can create as much money as you want and "loses" therefore have no meaning?

Mon, 12/23/2013 - 18:17 | 4271845 Ckierst1
Ckierst1's picture

Why do I feel like I hardly need Bloomberg to tell me how to prevent banksters from manipulating gold prices?  It ain't exactly a voice crying in the wilderness any more.  I guess better late than never.  Thanks for the scoop Bloomie!

Mon, 12/23/2013 - 17:56 | 4271813 toadold
toadold's picture

"Nothing is forever."

"Sooner or later conspiracies fail when they lose ananomity and they have damaged people who will take revenge."

Mon, 12/23/2013 - 17:36 | 4271777 Papasmurf
Papasmurf's picture

When Goldcore stops pumping gold, I'll know the bottom is in.

Mon, 12/23/2013 - 16:05 | 4271565 Quinvarius
Quinvarius's picture

It is so close to the end game that it doesn't matter anymore.  Lest we forget, it has been the physical stackers warning that paper would likely go to zero the whole time.  Say what you want about gold bulls.  They are realists.  If there are 63 claims per ounce, your claim can not be worth more than 1/63rd of an ounce.  When it gets to 100, owning one real ounce will have the same real worth in a shitstorm as a whole COMEX contract. 

Mon, 12/23/2013 - 15:40 | 4271508 Sufiy
Sufiy's picture


Jesse: Record COMEX Gold Claims Per Deliverable Ounce of Gold at 92 to 1

 Jesse reports that we have another All-Time-High leverage at COMEX with 92 Owners per one once of Gold.

 

http://sufiy.blogspot.co.uk/2013/12/jesse-comex-gold-claims-per-delivera...

Mon, 12/23/2013 - 15:53 | 4271549 Alea Iactaest
Alea Iactaest's picture

Why not link directly to his website?

http://jessescrossroadscafe.blogspot.com/

Oh yeah, tough to get clicks for yourself when you do that. Fucking rent-seeking parasitic middlemen.

Mon, 12/23/2013 - 15:37 | 4271498 Uncle Remus
Uncle Remus's picture

Execute executives?

Mon, 12/23/2013 - 19:17 | 4271990 gafgroocK
gafgroocK's picture

 

 

 

Use Gold Bullets?

Mon, 12/23/2013 - 20:36 | 4272154 The Wisp
The Wisp's picture

Gold Plated maybe, they don't deserve the best., Lead with some gold paint maybe  spot on.

Mon, 12/23/2013 - 15:27 | 4271471 Conax
Conax's picture

Since '08, trillions have been conjured and spread among the banks, foreign and domestic.

These mountains of confetti hang like a 'Sword of Damocles' above the USD's battered head.

For gold and silver to be held at 2008-10 levels proves they are manipulated, so why do we have to continue arguing the obvious?

We should find ways to make our anesthetized countrymen understand that their paper has a shelf life and will collapse taking their life savings from them at some point.
People should be repositioning themselves to hard assets and out of these toxic, phony 'assets' while they still can.

Damn, this is an evil system- nobody knows how evil it truly is, it is classified information.  The gold and silver are leaving this place.

Mon, 12/23/2013 - 17:07 | 4271709 NOTfromSanFrancisco
NOTfromSanFrancisco's picture

 

Conax,

I believe you answered your own question... "For gold and silver to be held at 2008-10 levels proves they are manipulated, so why do we have to continue arguing the obvious?"

You said, "We should find ways to make our anesthetized countrymen understand that their paper has a shelf life and will collapse taking their life savings from them at some point.
People should be repositioning themselves to hard assets and out of these toxic, phony 'assets' while they still can."

Just like telling a lie loud enough and long enough influences many simple minded people to believe the lie, so our hope and determined effort is to focus on telling the truth loud and long. Sometimes persistence does beat resistance, but often times, not without great expenditure of time, effort, energy and resources.

Blogs and responses to comments give the common and uncommon man a platform to express opinions and dissemenate facts. We can post resources and cite references. People who have ears to hear and a true desire to know the truth will at the very least listen, and at the most will learn the truth.

And as we all know, the truth can set us free from darkness and ignorance even if we remained shackled to the system that is in power, but then, we have to start somewhere... IMO.

 

Mon, 12/23/2013 - 15:19 | 4271449 JPMorgan
JPMorgan's picture

IF they wanted people like me out of PMs they should of manipulated the price higher out of reach, not lower.

At this point in time they are making my life easy as I accumulate more ounces for less cash.

 

 

 

 

Mon, 12/23/2013 - 16:52 | 4271692 YC2
YC2's picture

That is not how herds and giffen goods work, unfortunately.

Tue, 12/24/2013 - 03:07 | 4272851 MeelionDollerBogus
MeelionDollerBogus's picture

good thing gold is money and not a giffen good, then.

Mon, 12/23/2013 - 15:23 | 4271442 Son of Captain Nemo
Son of Captain Nemo's picture

"The best way to restore confidence in financial benchmarks is to remove the means, motive and opportunity for abuse."...

Start sending ALL of 'em to jail for fraud and abuse with the laws that are already on the books and that the judges swore an oath to protect and defend and this game of muscial chairs stops.

Good news is if we move forward with this kind of agenda we might be able to replace all the vicitms of the "3 strikes" policy out west with all the hardened criminals in D.C. starting with the lobbyists and those that "follow orders" for their complicity in financial fraud and war crimes which would likely place more convicts in our prisons than we have now.

Wouldn't it be sweet to see the likes of "The Dick" Cheney, Bush The (elder and younger), Eric Prince and Koch Brothers who invested their millions in the prison systems within the United States living in one of those wonderful one bedroom condos they invested in all those years ago and more profitable (with them in it) for the rest of their lives sharing a bunk bed with a 350 pound 6'10" man servant for life?!!!

Mon, 12/23/2013 - 18:30 | 4271881 Ckierst1
Ckierst1's picture

Why limit yourself to only neocon socialists when you can also place an equally nauseating collection of "liberal" socialists who are equally deserving.  Get off that left-right scam.

Mon, 12/23/2013 - 15:09 | 4271422 FishHockers
FishHockers's picture

I just keep buying and stashing.

Mon, 12/23/2013 - 14:53 | 4271377 bilejones
bilejones's picture

If the Gold market isn't being manipulated, it would be unique.

 

http://www.dailykos.com/story/2013/12/21/1264435/-This-Could-End-the-NSA...

Mon, 12/23/2013 - 14:50 | 4271368 PR Guy
PR Guy's picture

 

 

Whatever happend to the Occupy Movement? I think I found out here..

http://www.youtube.com/watch?v=IWzAGDOrt0o

 

Mon, 12/23/2013 - 14:46 | 4271357 Absalon
Absalon's picture

Anyone who really believed that banks were articially suppressing the price of gold would just take advantage of the banks by buying gold and waiting for market forces to drive the price of gold to its "true" value.

Mon, 12/23/2013 - 18:07 | 4271839 BigJim
BigJim's picture

Welcome to Zerohedge.

Eventually, however, people would like to see market forces assert themselves and prices to rise to their market values.

Tue, 12/24/2013 - 03:11 | 4272856 MeelionDollerBogus
MeelionDollerBogus's picture

market-value? What market? The true price of gold will be measured in loaves of bread, in barrels of oil, etc., not long from now. You can't assert that, you can only prepare for it.

Mon, 12/23/2013 - 14:38 | 4271333 Hulk
Hulk's picture

The copies of gold and silver inflated,
which after the theft were thrown into the lake,
at the discovery that all is exhausted and dissipated by the debt.
All scrips and bonds will be wiped out.

Mon, 12/23/2013 - 14:30 | 4271301 TideFighter
TideFighter's picture

It's going to be a long long time at this rate or lower, get used to it.

Mon, 12/23/2013 - 13:52 | 4271170 Peter Pan
Peter Pan's picture

The manipulations will keep on happening in everything from gold to silver to LIBOR and everything else regardless of what the "authorities" do. They simply learn from their mistakes and hide their future activities with greater care.

The only thing they will not be able to hide is the eventual collapse.

If you are stocking up for an economic winter the recent price declines are a bonus.

The big boys will always find a gold owner with a weakness out of whom they will squeeze whatever gold is needed to plug a hole.

They palyed havoc with the rupee in order to force the Indians to comply with their control over gold imports, they have probably taken back some of Venezuela's gold, Gadaffi's gold is yet to be found, Germany can wait, the Europeans have just about sold all their gold to pawn shops.

Eventually all these sources either cease to exist or as I said above, the rotteness of the system becomes manifest through collapse or panic.

Mon, 12/23/2013 - 14:22 | 4271288 strannick
strannick's picture

You stop banks from manipulating the price of gold, by letting them continue to manipulate the price of gold, til there's no more gold.

Mon, 12/23/2013 - 18:06 | 4271834 BigJim
BigJim's picture

 To ensure reliability, the process should be overseen by an independent institution with the appropriate governance structure and minimal conflicts of interest.

I nominate the Federal Reserve! Only they have the expertise, wisdom, and apple-pie goodness™ to oversee something like this.

Tue, 12/24/2013 - 03:10 | 4272857 MeelionDollerBogus
Mon, 12/23/2013 - 13:48 | 4271163 FieldingMellish
FieldingMellish's picture

$1180 will be broken before New Year. If an early hour smack can be launched on thin volume, expect sub $1100 in a matter of hours or even minutes like April. The belief of gold as a store of value has been destroyed in the West. What will be the price if they manage to destroy that belief in the East? Sub-$100.

Tue, 12/24/2013 - 03:12 | 4272858 MeelionDollerBogus
MeelionDollerBogus's picture

They don't have a belief in the East, they have unending civilization-experience. China's been around since the ROMAN EMPIRE, don't forget.

Gold will easily be 2500 mid-2014 and 3500 mid-2015.

Mon, 12/23/2013 - 14:01 | 4271214 Madcow
Madcow's picture

The US Gov should pass a law prohibiting Asians from thinking of gold as money.

+

While they're at it - they should also outlaw Feathercoin, Bitcoin, Litecoin, PPCoin, Terracoin, etc. etc. etc. 

Mon, 12/23/2013 - 14:05 | 4271223 FieldingMellish
FieldingMellish's picture

If they really wanted to do that they would manipulate the price lower all the while proclaiming it a "barbarous relic" and not "understanding how to price it" and then making alternatives like UST and stock markets yield better returns. But there is no chance of that happening...

Mon, 12/23/2013 - 13:59 | 4271208 AustrianJim
AustrianJim's picture

Ok,thanks. I will short it down to $100.

Mon, 12/23/2013 - 14:05 | 4271234 FieldingMellish
FieldingMellish's picture

Slam dunk...

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