"I Am Hoping For A Mini Puke": Details Of Barclays' Gold Manipulation

Tyler Durden's picture

Curious how and why commercial bank traders manipulate the price of gold? The following detailed narrative from the FCA should answer most lingering questions.

From the FCA Final Notice charging one Daniel James Plunkett

The Digital

On 28 June 2011, Barclays entered into an exotic options contract (the Digital) with Customer A. The Digital was a ‘digital’ option, meaning it had only two potential values: (i) a fixed pay-out to Customer A if the option finished ‘in the money’; or (ii) no pay-out if the option finished ‘out of the money’. In order to determine whether a digital option finishes in or out of the money, reference is usually given to the price or level of an agreed investment or benchmark on a specified date, known as the observation date.

The Digital had a notional amount of approximately USD43m and upon the signing of the contract, Customer A paid a premium of 8.18% of the notional value, USD4.4m, to Barclays, of which a proportion was attributed as a profit to Mr Plunkett’s book. The Digital had two observation dates, 28 June 2012 and 20 June 2013, and referenced the price fixed during the 3:00 p.m. Gold Fixing on each of these dates.

Under the terms of the Digital, if the price fixed in the 28 June 2012 Gold Fixing exceeded USD1,558.96, the Barrier, a payment of 9% of the notional amount, or approximately USD3.9m, would accrue to Customer A. If the price fixed during the 20 June 2013 Gold Fixing exceeded USD1,633.91, a payment of 18% of the notional amount would accrue to Customer A, less any accrued percentage payment related to the 28 June 2012 Gold Fixing.

The Digital was sold to Customer A by Barclays’ Sales Desk. Mr Plunkett was responsible for pricing and managing Barclays’ risk on the Digital. He was therefore aware of the terms of the Digital. The Digital referenced the price of gold fixed in the 3:00 p.m. Gold Fixing on 28 June 2012. As described [...] above, the terms provided that if the price fixed above USD1,558.96 (the Barrier) then Barclays would be required to make a USD3.9m payment to Customer A. Part of this payment would be attributed to Mr Plunkett’s book. If, however, the price of gold fixed below the Barrier, then Barclays would not have to make the USD3.9m payment to Customer A and a percentage of this additional profit would be attributed to Mr Plunkett’s book.

Mr Plunkett’s trading during the 28 June 2012 Gold Fixing

Mr Plunkett was aware that the Digital was the main risk exposure he had to manage on 28 June 2012. On the evening of 27 June 2012, Mr Plunkett sent an email summarising his risk exposures to other members of the Commodities business area, including members of the Precious Metals Desk, stating that the Digital was his “main event” for 28 June 2012 and that he was hoping for “a mini puke to 1558 for fixing”. The Authority understands the phrase “mini-puke” used by Mr Plunkett to have meant a drop in the price of gold ahead of the 28 June 2012 Gold Fixing – the price in the 3:00 p.m. 27 June 2012 Gold Fixing had fixed at USD1,573.50 and COMEX Gold futures were trading at approximately USD1,577.50 at the time of his email. Mr Plunkett repeated this sentiment on the morning of 28 June 2012, stating to a colleague “hopefully we fix 1558, or 1558.75 ideal”.

At the start of the 28 June 2012 Gold Fixing at 3:00 p.m., the Chairman proposed an opening price of USD1,562.00. However, the proposed price quickly dropped to USD1,556.00, following a drop in the price of August COMEX Gold Futures (which was caused by significant selling in the August COMEX Gold Futures market, independent of Barclays and Mr Plunkett). The proposed price in the 28 June 2012 Gold Fixing then rose, eventually fixing at USD1,558.50 at 3:10 p.m.

At 3:06 p.m., shortly after the Chairman had increased the proposed price to USD1,558.50, Mr Plunkett, who had not placed any previous orders during the Gold Fixing, placed a large sell order of between 40,000 oz. (100 bars) and 60,000 oz. (150 bars), with Barclays’ representative on the Gold Fixing. This order was incorporated by Barclays’ representative into Barclays’ net position, which led to Barclays declaring itself to be a seller of 52,000 oz. (130 bars).

The purpose of Mr Plunkett’s order was to decrease the likelihood of the proposed price rising further (above the Barrier) and to increase the likelihood that the price would fix at USD1,558.50 (below the Barrier).

Once all the Gold Fixing Members had declared their respective positions at USD1,558.50, the level of selling in the 28 June 2012 Gold Fixing exceeded the level of buying by 190 bars (155 bars buying/345 bars selling). This suggested that the proposed price in the 28 June 2012 Gold Fixing was likely to move lower.

At 3:07 p.m. Mr Plunkett withdrew his entire sell order, which resulted in Barclays’ representative withdrawing Barclays’ position (selling 130 bars). This reduced the imbalance in the 28 June 2012 Gold Fixing from 190 bars to 60 bars (155 bars buying/215 bars selling).

By withdrawing his entire sell order, Mr Plunkett intended to bring the difference between buying and selling interests within the 50 bar margin required for the price to fix. This would also increase the likelihood of the price fixing at USD1,558.50 (below the Barrier).

Following Mr Plunkett’s withdrawal of his order, one of the Gold Fixing Members reduced its selling position by 10 bars, bringing the imbalance in the 28 June 2012 Gold Fixing to 50 bars. However, before the price was fixed, there were a number of further changes in the levels of buying and selling in the 28 June 2012 Gold Fixing, which coincided with an increase in the price of August COMEX Gold Futures.

As a result of these changes, the level of buying at USD1,558.50 exceeded the level of selling (155 buying/45 selling), and the proposed price was likely to move higher. Given that the price of August COMEX Gold Futures was trading around USD1,560.00 at this time, if the Chairman did move the proposed price in the 28 June 2012 Gold Fixing higher, it was likely to be to a similar price level (which was higher than the Barrier).

At 3:09 p.m., Mr Plunkett again placed a large sell order, 60,000 oz. (150 bars), with Barclays’ representative, who, also taking into account changes in customers’ orders, declared Barclays’ net position in the 28 June 2012 Gold Fixing to be selling 40,000 oz. (100 bars).

By placing his sell order, Mr Plunkett intended to increase the likelihood of the price fixing at USD1,558.50 (below the Barrier).

Barclays’ sell order, of which Mr Plunkett’s order was a significant component, had the effect of bringing the level of buying and selling in the 28 June 2012 Gold Fixing to a point where the imbalance was 10 bars (155 buying/145 selling) and the price could be fixed. Indeed, shortly after Mr Plunkett placed this order, two of the Gold Fixing members adjusted their orders and at 3:10 p.m. the Chairman declared the price to be fixed at USD1,558.50 (below the Barrier). As a result, Barclays was not obligated to make the USD3.9m payment to Customer A and Mr Plunkett’s book thereby profited by USD1.75m (excluding hedging), which was in addition to the initial profit that his book had received upon the sale of the Digital.

Events after the 28 June 2012 Gold Fixing

Shortly after the conclusion of the 28 June 2012 Gold Fixing, Mr Plunkett repurchased 60,000 oz. (150 bars) of gold by executing an internal trade with Barclays’ Gold Spot Book. The purpose of executing this order was to unwind the 60,000 oz. (150 bars) position he had taken during the 28 June 2012 Gold Fixing.

Mr Plunkett’s trade was executed at a higher price than that at which he had sold during the 28 June 2012 Gold Fixing, and his trading book suffered an immediate loss of approximately USD114,000.

Customer A’s enquiry and Barclays’ and the Authority’s investigations

Very shortly after the conclusion of the 28 June 2012 Gold Fixing, Customer A became aware that the price had fixed just below the Barrier and sought an explanation from Barclays as to what happened in the Gold Fixing. Customer A’s enquiry was relayed to Mr Plunkett. Mr Plunkett provided an explanation that referred only to the significant selling in August COMEX Gold Futures. Mr Plunkett did not disclose his trading activity during the 28 June 2012 Gold Fixing, which was a material fact that ought to have been disclosed.

Later on 28 June 2012, and again on 29 June 2012, Mr Plunkett had further communications within Barclays regarding Customer A’s concerns. Again, Mr Plunkett did not disclose his trading activities during the 28 June 2012 Gold Fixing.

After the weekend, on the morning of Monday 2 July 2012, Mr Plunkett sought out his line manager and informed him that he had traded during the 28 June 2012 Gold Fixing. He also subsequently reported his trading to Barclays’ Compliance.

During Barclays’ internal investigation, Mr Plunkett provided an account of his trading during the Gold Fixing that was untruthful, in that he did not disclose the true rationale for his trading, or the reasons why he failed to disclose his trading to the Sales Desk on 28 June 2012. In giving this account, Mr Plunkett intended to give the impression that he placed orders in the 28 June 2012 Gold Fixing for reasons other than to increase the likelihood that the price of gold would fix below the Barrier.

Mr Plunkett continued to provide this untruthful account of events when he was interviewed by the Authority.

The circumstances of Mr Plunkett’s trading in the 28 June 2012 Gold Fixing were formally investigated by Barclays. Barclays subsequently repaid Customer A the full amount that Customer A would have been due had the price of gold in the 28 June 2012 Gold Fixing fixed above the Barrier.

* * *

A historical intraday chart of the gold price from June 28, 2012 reveals precisely where the action was: just so Plunkett did not have to pay out millions, gold ultimately tumbled from $1590 to just below $1559 in one day.

* * *

And now we know how it is done, and also know that a single trader can move and reprice the entire gold market courtesy of massive paper gold slams at critical points without regard for price discovery, when self-serving interests are all that matter: just as we have alleged since 2009.

Which leaves two open questions:

  1. How many other people in addition to Customer A were impacted by Daniel Plunkett's gold manipulation, because while one person had a lot to lose on an artificial gold repricing, it is just as true that many more people positioned alongside Customer A also lost, if perhaps smaller amounts (but nobody knows). The fact that they lost, however, due to a criminal, self-serving intervention by one person, does not mean that they too aren't entitled to monetary compensation. Or perhaps the FCA will pull out the HFT excuse which is that if millions lose minuscule amounts of money due to market rigging, it isn't really market rigging?
  2. How many other traders at other commercial banks, other central banks and the BIS itself, do this on a daily basis, and what would the price of gold be if one would eliminate the compounded impact of all comparable gold manipulation events (whether at the fixing or at any other time) over the past decade or, if one goes back to the very beginning of the London gold fix, the past 117 years?

We aren't holding our breath to find out.

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Sudden Debt's picture

a bank that's throwing a few hundred million in the market on "hope"...




Quinvarius's picture

And if you want to check on your savings in the future, they will be stored at the Soylent Green factory.  Feel free to stop in at any time.

Newsboy's picture


It's a TRAP!

(Windfall gains taxes in a few yers, confiscation, etc.)

Doña K's picture

Meanwhile we don't know if client A had done a assymetric bet elsewhere where he would make 10 times as much because he knew that Barclays will play that game since he had never won that bet.

Maddening gambling in these casinos

bania's picture

Plunk It? Great name if you're dropping the price down in a short window of time. 

Xibalba's picture

But the folks from 'regulations' said it was all good! 

what's that smell's picture

the chain of whipped boys goes from plunkett to barclays to the bank 'o england upstairs to the whipper FED.

"the rigged buck stops here," jan "the man" yellen.

i smell the skunky aftersmell of whitewash, bitches.

old naughty's picture

don't care about them boys or non-boys...

where are them gold, that's what i want to know,

could they be stargate-ported to the Mars moon?

XAU XAG's picture

A historical intraday chart of the gold price from June 28, 2012 reveals precisely where the action was: just so Plunkett did not have to pay out millions, gold ultimately tumbled from $1590 to just below $1559 in one day.



I would like to know if he or and  Barclays were shorting gold at this time frame

$31 drop could have raked in alot of dosh if they were shorting

XAU XAG's picture

stating that the Digital was his “main event” for 28 June 2012 and that he was hoping for “a mini puke to 1558 for fixing”


We now have the correct trade terminology for the next "PUKE"

instead of crash or smash!


Wonder what the trade terminology is when it rises?



Dr. Engali's picture

Barclay's and Mr. Plunkett  should have been force to puke up all profits made over the years from their market manipulations.

asscannon101's picture

Let the class-action lawsuits begin... Bleed these fuckers dry and crush the empty husk underfoot. Surely there must be a few (thousand) attorneys with balls enough to see how deep Barclays' pockets really are.

Winston Churchill's picture

Hold off a few days while I move some money out of Barclays ,Isle of Man, first.

WhyDoesItHurtWhen iPee's picture

Hmm, bets Customer A gets backdoor piece of the action (fucks his muppets).

pods's picture

And people look at me funny when I try to tell them the difference between physical and phony (paper) gold.

Bankers can just about fuck up anything.

I just don't get the Cog Dis of people.  They admire (or worse want to become) bankers yet ticks get such a bad rap.


semperfi's picture

when I start up my new country banks will be illegal

semperfi's picture

down arrow?  No banks will be inconvenient, yes.  But the advantanges far far outweigh the advantages - especially now that peer-to-peer transactions are nearly ubiquitous.  I've never appreciated Jefferson (& company) more than I do now....

 “The end of democracy and the defeat of the American Revolution will occur when government falls into the hands of lending institutions and moneyed incorporations.” -- Thomas Jefferson

"If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered." -- Thomas Jefferson


“Whoever controls the volume of money in our country is absolute master of all industry and commerce…and when you realize that the entire system is very easily controlled, one way or another, by few powerful men at the top, you will not have to be told how periods of inflation and depression originate. – President James Garfield, 2 weeks before his assassination.


BrosephStiglitz's picture

Voted down because banks do (or should if they weren't such wankers) provide some legitimately useful functions such as savings security.  No banks at all isn't a credible solution and I suspect it wouldn't last forever either, given the ridiculously short memory of most generations. 

Better to have a banking system that is just a local vault where people pay a flat fee to insure their savings somewhere safe.  That way the banker has profit incentive, and if he fucks up the people can hang his ass from a tree-branch.

Edit:  this whole global theatre that pretends to insure individual's savings on the surface while creating a government  backed ponzi is about a million miles from what a banking system should be, but that doesn't negate the real human need for the "core" service that a bank should offer.

semperfi's picture

100% in agreement with you on that. But given human nature's entropic tendency to become increasingly corrupt as a function of time, every time its tried in every new social system that's ever been hatched, I will gladly suffer the inconveniece of having to deal with my money myself rather than having to deal with the inconvenience of being ultimately raped by warmongering thieving power-mad tyrannical moneychangers such as the rothschilds regime and all those who came before them.

what's that smell's picture

for every cockroach you find in the sink, there are a thousand under it.

has anybody seen the can of RAID?

BrosephStiglitz's picture

The really messed up part is that this type of market manipulation hits real businesses with real margins.  To Plunkett this was just a paper game.  To miners relying on stable pricing to forecast profits this volatility makes for an increasingly risky business environment.

You'd need a degree in statistics and an idea about stochastic functions just to forecast some of these financialized commodity prices.  Fuck these assholes.

BrosephStiglitz's picture

Also.. the gold market is pretty big in comparison to silver.  Just imagine what a shitshow the silver market must be.. A wayward sneeze at a Barclay's trading desk might send that market into a tailspin.

fonzannoon's picture

Pods most people just want to do blow off a hookers ass. Show me a tick that can do blow off a hookers ass and I will show you millions of aspiring tick people.

pods's picture

Tossin the salad, banker style!

flyingcaveman's picture

Every time at the checkout when there are carefully examining my federal reserve notes to make sure they 'real', I have to bite my toungue.  I think their heads would explode if I tried to explain how this 'real' money is actually counterfeit.  Besides, I don't really have time to explain it when there's a downside risk of getting arrested just for speaking the truth.

Seasmoke's picture

No more paper Gold !!!!!!

semperfi's picture

china, russia, india, etc  are answering that call

youngman's picture

Faith in the markets.....is gone...you have to be an insider to win...a member of the tribe helps too...

semperfi's picture

were the markets ever NOT rigged ?

what's that smell's picture

it was less rigged when humans traders took risk; today, machines harvest "profit" like slaughterhouses render pigs.

firstdivision's picture

Customer A was an idiot to do an option deal with the bank to begin with.

BrosephStiglitz's picture

He might have reduced his risk by taking out smaller incremental option contracts on separate days, or multiple contracts with separate banks.  The administration costs would have been higher, but this guy got screwed.

Just goes to show though.. if you shake hands with a banker you had better count your fingers after. 

semperfi's picture

there's a sucker born every day - marketing 101

Rough-Trader's picture

They deserve to be locked up forever, scammers.
Low lives of the planet, burn forever morons.

sodbuster's picture

It's pretty much the same thing the Fed is doing to Fraud Street. Manipulating and rigging the outcome. Think they'll ever be fined? Jail time? When you can steal your clients segregated accounts monies, and still be walking around free(Jon Corzine), there is no hope of any justice in this country.

sodbuster's picture

Crime pays well in the New World Order. If J. Dillinger were alive today, he wouldn't rob banks, he'd aquire ownership of one- or more.

buzzsaw99's picture

does he still work there? lulz

dontgoforit's picture

Prison and fines; not just fines.  If this isn't criminal, release OJ and Charles Manson...

SilverIsMoney's picture

People need to put this guy in a world of hurt until he starts spilling the beans on the actual truth... One guy? Yea fucking right!

semperfi's picture

can someone please explain to me how this is different than gambling vs The House

BrigstockBoy's picture

I think everyone on ZH can answer the two open questions with a high degree of confidence:

1. Shitloads of muppets have been scalped, and
2. Of course these practices are rampant. It starts with the "fix" and continues with "preventative maintenance."

What amazes me is that these fuckers can seemingly point to "conventional" practices and rationalize that what they're doing is somehow acceptable. The financial industry is littered with sociopaths.

Squid Viscous's picture

Time to start scalping bankers, and desecrating their corpses as an example ... like at Little Big Horn

Rock On Roger's picture

That example didn't work out so well for Crazy Horse.

11b40's picture

Didn't work out too well for Custer, either.

Son of Captain Nemo's picture

At this point.  What can't they do with "impunity"?

And why aren't the substantial number of investors and the attorneys that represent them in the streets with pitchforks and torches at this point???

Congrats to ZeroHedge for posting this. 

You need to pin this one up in gray for at least a week as the "smoking gun" of all "smoking guns" with respect to the foul manipulation of the PM markets and those who control it!...