Gold Price Rigging Fears Put Investors On Alert - FT

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Today’s AM fix was USD 1,333.00, EUR 968.54 and GBP 800.46 per ounce.
Friday’s AM fix was USD 1,320.75, EUR 963.63 and GBP 792.20 per ounce.           

Gold fell $0.20 or 0.02% Friday to $1,323.50/oz. Silver lost $0.02 or 0.09% at $21.81/oz.
Gold and silver were both up for the week at 0.37% and 1.68%.

Gold has risen 0.8% in London and reached $1,334.60/oz, its highest level since October 31. After last years 28% decline, gold is now 11% higher this year.


Gold in U.S. Dollars, 5 Year - (Bloomberg)

Gold may post its fourth week of gains as concern of prolonged political unrest in Ukraine raises fears of a sovereign default and contagion. This is adding to safe haven demand for gold - particularly in Eastern Europe and Russia.

A breakthrough peace deal for Ukraine has halted days of violence and may bring  sweeping political change, meeting many of the demands of the pro-European opposition. However, there are considerable financial and economic challenges facing Ukrainian banks, the Ukrainian pension system and the wider economy. There remains the risk of a default that could lead to contagion.

Bullion for immediate delivery traded at $1,325.10 an ounce at 2:23 p.m. in Singapore from $1,324.28 on February 21, when prices capped a third weekly gain.

The Financial Times reports this morning that global gold prices may have been manipulated on 50% of occasions between January 2010 and December 2013, according to analysis by Fideres, a consultancy.

The findings come amid a probe by German and UK regulators into alleged manipulation of the gold price. Prices are set twice a day by Deutsche Bank, HSBC, Barclays, Bank of Nova Scotia, and Societe Generale in a process known as the London gold fixing.

Fideres' research found the gold price frequently climbs, or falls, once a twice-daily conference call between the five banks begins, peaks or troughs, almost exactly as the call ends, and then experiences a sharp reversal, a pattern it alleged may be evidence of "collusive behavior."

Fideres concluded that this "is indicative of panel banks' pushing the gold price upwards on the basis of a strategy that was likely predetermined before the start of the call in order to benefit their existing positions or pending orders."

"The behavior of the gold price is very suspicious in 50% of cases. This is not something you would expect to see if you take into account normal market factors," said Alberto Thomas, a partner at Fideres.

Pension funds, hedge funds, commodity trading advisers and futures traders are most likely to have suffered losses as a result, according to Mr Thomas. He said that many of these groups were "definitely ready" to file lawsuits.

Daniel Brockett, a partner at law firm Quinn Emanuel, also said he had spoken to several investors concerned about potential losses.

Matt Johnson, head of distribution at ETF Securities, one of the largest providers of exchange-traded products, said that if gold price collusion is proven, "investors in products with an expiry price based around the fixing could have been badly impacted."

Gregory Asciolla, a partner at Labaton Sucharow, a U.S. law firm, added: "There are certainly good reasons for investors to be concerned. They are paying close attention to this and if the investigations go somewhere, it would not surprise me if there were lawsuits filed around the world."

All five banks declined to comment on the findings, which come amid growing regulatory scrutiny of gold and precious metal benchmarks.

BaFin, the German regulator, has launched an investigation into gold-price manipulation and demanded documents from Deutsche Bank. The bank last month decided to end its role in gold and silver pricing. The U.K.'s Financial Conduct Authority is also examining how the price of gold and other precious metals is set as part of a wider probe into benchmark manipulation following finding of wrongdoing with respect to LIBOR and similar allegations with respect the foreign exchange market.

The Financial Times article, ‘Gold price rigging fears put investors on alert’,can not be accessed this morning, but the Gold Anti Trust Action Committee (GATA) covered the Financial Times story in their dispatches and it can be read here. 

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