• BullionStar
    05/30/2016 - 21:24
    The US Gold Market is best known as the home of gold futures trading on the COMEX in New York. The COMEX has a literal monopoly on gold futures trading volumes worldwide, but very little physical...

Gold Price Manipulation Was "Routine", FT Reports

Tyler Durden's picture




 

Two weeks ago when news broke about the first confirmed instance of gold price manipulation (because despite all the "skeptics" claims to the contrary, namely that every other asset class may be routinely manipulated but not gold, never gold, it turned out that - yes - gold too was rigged) we said that this is merely the first of many comparable (as well as vastly different) instances of gold manipulation presented to the public. Today, via the FT, we get just a hint of what is coming down the pipeline with "Trading to influence gold price fix was ‘routine." We approve of the editorial oversight to pick the word "influence" over "manipulate" - it sound so much more... clinical.

What the FT found:

When the UK’s financial regulator slapped a £26m fine on Barclays for lax controls related to the gold fix, the UK financial regulator offered more ammunition to critics of the near-century-old benchmark. But it also gave precious metal traders in the City of London plenty to think about.

 

While the Financial Conduct Authority says the case appears to be a one off – the work of a single trader – some market professionals have a different view. They claim the practice of nudging a tradeable benchmark in order to protect a “digital” derivatives contract – as a Barclays employee did – was routine in the industry.

Well, then, if gold price manipulation, pardon, "influence" was routine, be it to avoid digital option trips or any other reasons, then it's all good, right?

Apparently not, especially if a "customer" of a bank that was running a prop trade against the customer ended up costing said customer millions in lost profits.

As a result, customers of Barclays and other market-making banks may be looking to see if they too have cause for complaint, according to one hedge fund manager active in the gold market.

The only piece of actionable information from the above sentence is that Barclays actually has customers: we expect that to change. After all, with the exception of Goldman's muppets, there hasn't been a more clear abuse of client privileges than what relatively junior trader Daniel Plunkett did while at Barclays. However, Plunkett is just the first of many. Many, many.

“If I was at the FCA I would be looking at all banks trading digitals. This could be the tip of the iceberg – there’s a massive issue with exotic derivatives and barriers.”

That, naturally, assumes that the FCA wasnt to catch more manipulators, pardon, "influencers" of gold and other OTC derivative prices. Which is hardly the case: after all one never knows which weakest link rats out the people at the very top: the Bank of England itself, and perhaps even higher: going all the way to the BIS and those who equity interests the BIS protects.

So just what is the most manipulated product with either gold or FX as underlying?

In the City, digital options are common in the precious metals sector and, especially, in forex trading. A payout is triggered if a predetermined price – or “barrier” – is breached at expiry date. If it is not, the option holder gets nothing.

 

One former precious metals manager at a big investment bank says there has long been an understanding among market participants that sellers and buyers of digitals would try to protect their positions if the benchmark price and barrier were close together near expiry.

Ideally, the underlying will be relatively illiquid, with a price fixing set by a small number of individuals, individuals who can be corrupted or simply onboarded to your strategy, thus incetivizing them to keep their mouth shut and assist you in ongoing rigging attempts.

In the case of gold, this means trying to move the benchmark price, which is set during the twice daily auction “fixing” process run by four banks, including Barclays.

 

That is what the Barclays trader, Daniel Plunkett, did on June 28, 2012. Exactly a year earlier, the bank had sold an options contract to an unnamed customer stating that if after 12 months the gold price was above $1,558.96 a troy ounce, the client would receive $3.9m.

 

By placing a large sell order on the fix Mr Plunkett pushed the gold price beneath the barrier, thus avoiding the payout. After the counterparty complained, the FCA became involved. Barclays paid the client the $3.9m, and was fined. Mr Plunkett was also fined – £95,600 – and banned from working in the City.

 

In its ruling, the FCA criticised Barclays for its poor controls related to the gold fix and said the bank had failed to “manage conflicts of interests between itself and its customers”.

 

“We expect all firms to look hard at their reference rate and benchmark operations to ensure this type of behaviour isn’t being replicated,” said Tracey McDermott, the FCA’s director of enforcement and financial crime.

Still, why did gold manipulation go on for as long as it did? Because the Barclays trader was an amateur, and instead of taking the money of one of the "old boys' club" participants, ended up robbing an outsider, someone who had the temerity fo lodge a formal complaint.

The identity of the Barclays client has not been revealed. But a senior gold trader with knowledge of the transaction says it was not another investment bank or hedge fund. “This was not professionals going head to head,” he says.

Wait a minute... this smells remarkably familiar to the LIBOR rigging - after all there it was one "sophisticated" investors against another: the impact of rigging the IR market hardly ever escaped the arena of "sophisticated" influencers, pardon, traders. It is also why Libor was manipulated for a decade before the regulators finally figured it out: because while banks may have lost money to this rigger or that, they were all in it together, and better to lose money individually than to sink everyone at the same time. Alas, that is precisely what happened with Libor.

And now it is coming to gold.

“If you have Goldman Sachs on one side and JPMorgan on the other, the gloves are off. But not everybody in the market has the same level of sophistication and vindictiveness.”

 

The gold trader familiar with the Barclays case expresses some sympathy for Mr Plunkett, saying in the pre-financial crisis days the trader may have been censured by his bosses if he had not defended the digital option sold by the bank.

it gets worse:

“What’s changed now is the market morality,” he says. “We can’t simply say: it’s always been done this way.”

Well that's ironic: because it has always been done this way. Influenced. Or manipulated... or however you want to call it.

And while in the case of Libor the regulators could get away with it by stating only other professionals were impacted by years of wholesale market rigging because tracking the impact of daily gyrations in a rigged fix are virtually impossible for normal individuals to trace, and thus prove monetary impairment,  with the gold market they may find some significant resistance using this approach.

So what approach will they use? Why, just like in the case of HFT: there may have been manipulation, but it only impacts hedge funds and other "sophisticated" investors they will say. Because when it comes to rigged markets, mom and pop have surely never had it better.

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Tue, 06/03/2014 - 14:04 | 4820719 localsavage
localsavage's picture

These fuckers need to die.....

Tue, 06/03/2014 - 14:16 | 4820755 GetZeeGold
GetZeeGold's picture

 

 

Ship them a nailgun kit without the instructions.

Tue, 06/03/2014 - 14:19 | 4820770 BaBaBouy
BaBaBouy's picture

"" Gold Price Manipulation Was "Routine", FT Reports""

NOT "WAS" ... ==> " IS "

Tue, 06/03/2014 - 14:21 | 4820778 nope-1004
nope-1004's picture

USD reserve status requires the barometer of fiscal malfeasance (gold) be held at levels so as not to put a blemish on the USD and banker fraud.  Simple as that.

Is it manipulated?  F'n rights.... always has been.

Only a liar or a fool would say they "don't begin to understand the gold market".

 

Tue, 06/03/2014 - 14:34 | 4820817 chapaev's ghost
chapaev's ghost's picture

The price of gold is being MANIPULATED?????

My mind is FUCKING BLOWN!

I NEVER SAW THIS COMING!

THE COGNITIVE DISSONANCE IS UNBEARABLE!

Oh, please God, MAKE IT STOP!!!!

AARRGGGGHHHH!!!!

Tue, 06/03/2014 - 14:44 | 4820851 THX 1178
THX 1178's picture

So how many countless bullseyes does this make Tyler(s)?

Tue, 06/03/2014 - 15:39 | 4821020 I MISS KUDLOW
I MISS KUDLOW's picture

dont forget guy  free market capitalism IS the best path to prosperity

Tue, 06/03/2014 - 16:17 | 4821146 Charles Nelson ...
Charles Nelson Reilly's picture

Thanks Lar, I was starting to believe Pinketty and his Karl Marx toe sucking worshippers?!?

Tue, 06/03/2014 - 18:04 | 4821335 J S Bach
J S Bach's picture

May we all live to see lamppost hangings of Central Bankers as "Routine".

Tue, 06/03/2014 - 18:14 | 4821394 Cacete de Ouro
Cacete de Ouro's picture

So where is this Marc Booker fucker, the head of gold spot trading at Barclays who suddenly left a few weeks ago? Where the fuck is he and why isn't he in jail?

Tue, 06/03/2014 - 19:06 | 4821508 Zadok
Zadok's picture

Hangin w Corzine.

Tue, 06/03/2014 - 21:38 | 4821857 logicalman
logicalman's picture

Now, there's an idea!

Just need two ropes.

Wed, 06/04/2014 - 01:05 | 4822290 TheReplacement
TheReplacement's picture

You should try to be more conservative.  In order to achieve you desired goal in a less expensive manner you should use one rope and two nooses.  Cats hanging by their tails from a clothes line comes to mind.

Tue, 06/03/2014 - 14:48 | 4820864 Ignatius
Ignatius's picture

Three questions to always keep in mind:

 

Who's telling us?

Why are they telling us?

And why are they telling us now?

 

Hunch:  we are at or near the bottom in this cycle and gold will soon resume its bull phase... because they are ready and/or desire for this to happen.

 

Tue, 06/03/2014 - 15:30 | 4820977 SWRichmond
SWRichmond's picture

They are telling us now so that we can believe "oh, they caught it, and it's ok now, no more manipulation".

Wed, 06/04/2014 - 05:56 | 4822436 what's that smell
what's that smell's picture

reminds me of the rapist who told the judge he used his influence.

Tue, 06/03/2014 - 18:17 | 4821401 Cacete de Ouro
Cacete de Ouro's picture

Bank of England and the Treasury told the FCA to release this little mini-puke report on Plunkett. It's called hanging out info in a modified limited way. You see, it's in the MI6 textbook, some of the Treasury and Bank chaps know the MI6 chaps from Cambridge days.

Tue, 06/03/2014 - 19:20 | 4821541 tvdog
tvdog's picture

Are you sure it wasn't Eton? Still longing for the days of playing in the dorm after dark, under the sheets.

Wed, 06/04/2014 - 01:06 | 4822293 TheReplacement
TheReplacement's picture

You clearly misunderstand.  Plunkett is just a renegade employee in Cincy.

Wed, 06/04/2014 - 01:08 | 4822295 TheReplacement
TheReplacement's picture

They've done a much better job of getting out in front and staying on top of this gold story, so far.

Wed, 06/04/2014 - 00:22 | 4822237 Kirk2NCC1701
Kirk2NCC1701's picture

Call me a cynic, but I'm guessing that they too have realized that the sheeple have become so dumb and numb, that no 'scandal' bothers them any more, as long as they get their "green grass and peace", so to speak.

Only if the goodies stop flowing will the sheep bleat or panick in earnest.  By which time it'll be too late for them.

Tue, 06/03/2014 - 17:43 | 4821322 NidStyles
NidStyles's picture

Seems to me that they are trying to frame the discussion as if they were manipulating the price upwards...

Tue, 06/03/2014 - 18:49 | 4821481 Bay of Pigs
Bay of Pigs's picture

That's what Kid Dynamite and Trader Dan will tell you these days (that the banks were pushing gold higher for many years).

It's fucking laughable on its face. After MF Global, ABN Amro, Germany and now Ecuador (just yesterday), it is clear that kind of explanation is complete horseshit.

Tue, 06/03/2014 - 19:22 | 4821545 NidStyles
NidStyles's picture

Sounds like something they would push to allow them to buy more.

Wed, 06/04/2014 - 01:10 | 4822299 TheReplacement
TheReplacement's picture

Fueling public doubts about the validity of the price of gold and the fairness of the gold market probably will help keep the price down.  Perhaps they are running out of other instruments of manipulation.

Tue, 06/03/2014 - 19:15 | 4821529 tvdog
tvdog's picture

I'm shocked, I tell you! Shocked beyond belief! Who could have thought a banker could be dishonest?

Tue, 06/03/2014 - 14:37 | 4820823 GetZeeGold
GetZeeGold's picture

 

 

...be held at levels so as not to put a blemish on the USD and banker fraud.

 

In other words the price of physical gold is being subsidized.

Tue, 06/03/2014 - 14:57 | 4820882 nope-1004
nope-1004's picture

Yes, inadvertently because the paper price of gold is being smashed to prop up the dollar.  The banksters initiated a paper pricing of physical, which is why we have such a massive disconnect in the PM market between supply/demand fundamentals.  The paper market is a complete hoax.  The fact that the paper price of gold needs to routinely be kept down against the common forces of nature reveal the extent of the theft going on and how insolvent the banking sector really is.

It would appear by the cartel's actions that there are some very large problems behind the scenes, otherwise LIBOR, Forex, and PM's wouldn't need such attention.

 

Tue, 06/03/2014 - 16:25 | 4821165 silverserfer
silverserfer's picture

its not to hard to see that if central banks are buyers of physical gold and have the ability to create unlimited amounts of new paper gold derivitves to dilute the price that this can and will continue as long as the miners can afford to put up with it. The global "Cash for gold" operation is mainly over now and has cleaned out the scrap supply from our mom and dads jewrey boxes so this is now all about miners being slaves to bankers untill the fuel to gold price needs to be adjusted. 

I think many miners are locking in future porduction in FEAR of this BS continung. Its not like the can tell the banks to fuck off and just hold out for a price rebound. 

Tue, 06/03/2014 - 14:20 | 4820780 Pinto Currency
Pinto Currency's picture

 

 

 

The LBMA and COMEX exchanges themselve are carefully set up to trade virtual, non-existent gold.

Last summer the LBMA was trading 8,500 tonnes of gold per day vs. 10 tonnes produced each day by mines.

http://www.goldcore.com/goldcore_blog/london-bullion-market-association-june-clearing-turnover-statistics

And it was all coordinated by the BIS, the BofE, and the FED.

Tue, 06/03/2014 - 14:44 | 4820850 buyingsterling
buyingsterling's picture

No manipulation occurring now because we're in a down market. Just ask Trader Dan.

Tue, 06/03/2014 - 17:18 | 4821278 Bay of Pigs
Bay of Pigs's picture

I used to like Dan way back when at JSMineset.

Now he's just another useless chart watching douchebag ignoring the elephant in the room.

Tue, 06/03/2014 - 15:11 | 4820919 Took Red Pill
Took Red Pill's picture

"Still, why did gold manipulation go on for as long as it did?" This, too is past tense. It's still going on!

Tue, 06/03/2014 - 16:01 | 4821093 sampo
sampo's picture

This system just isn't going to correct all the cumulative effect that all these different kinds of manipulations have been distracting from the reality.

 

See you in the next system.

Tue, 06/03/2014 - 18:08 | 4821381 teslaberry
teslaberry's picture

this is the subtext to just about every scandal. even the snowden 'affair' .

NOTHING has been done since 'SNOWDEN" other than to consolidate AND INCREASE the width and depth of spying on the american public. OPENLY AND NOTORIOSLY in part and CLEVER LAWYERING AND OUTRIGHT LYING in part.

the subtext to anyone paying attention is that even when it comes to the small percentage of scandals that are being 'unmasked' the result is that the corrupt self dealing is not stopped but INCREASE, or at least stays constant.

THIS IS NOT A SCANDAL BUT A CAUSE FOR BUYING MORE FAT TAIL SOCIAL COLLAPSE INSURANCE.

I've still come to believe that until people are starving to death nothing can change. That day may take 20 or 30 years in the west. but the writing is on the wall and the days are numbered. ESCALATING LOOTING OF THE BARE SHELVES IS A VICIOUS POSITIVE FEEDBACK LOOP AND RESULTS IN WHAT WE ARE CURRENTLY SEEING.

i see it in my own lawfirm , in our case load, in the lack of real options for the partners. I am just a cog , but even the partners---people who live high on the hog parastically off wall street---what real choices do they have as to their client load other than to leave law altogether?

seriously is UP or SHUTDOWN. with a commercial services firm ---shutdown is just closing up.

but what does shutdown imply for NONcommercial PUBLIC firms; that is to say what happens when governments fail.

Tue, 06/03/2014 - 18:31 | 4821438 Imminent Collapse
Imminent Collapse's picture

Blow up tour TV, throw away your paper, move to the country, build you a home, plant a little garden, eat a lot of peaches, try to find Jesus on your own. - John Prine

Tue, 06/03/2014 - 20:58 | 4821761 WTFMOFO
WTFMOFO's picture

Gotta find a level headed dancer first!

Tue, 06/03/2014 - 20:58 | 4821762 WTFMOFO
WTFMOFO's picture

dupe

Tue, 06/03/2014 - 14:21 | 4820772 Pinto Currency
Pinto Currency's picture

-

 

Tue, 06/03/2014 - 14:44 | 4820855 alexcojones
alexcojones's picture

One HUGE reason I get a daily dose of the drug known as ZH, is the dark, dartboard humor.

ZH is funnier and more daring, more sarcastic, more Political Un-correct, than the Onion.

ZH posters are often funnier than the paid writers on the Jon Stewart show.

Actually I think some of the Daily Show show writers READ the remarks here to get good ideas.

Reading Zerohedge is better than crack to a crack addict, because our teeth are less damaged.

AC

Tue, 06/03/2014 - 15:50 | 4821057 ParkAveFlasher
ParkAveFlasher's picture

The Tribe will tell you what's funny, like they tell you what's worth buying.  If it can't be bought, then it isn't worth buying.  It can't be bought if it isn't on the shelf.  Now back to your regularly scheduled programming. 

Tue, 06/03/2014 - 15:54 | 4821069 saltedGold
saltedGold's picture

Alex, on average I enjoy the comments more than the articles.  I'm not saying that the articles are bad, I just really like the comment section here.  ZH is addictive.  During the week I refresh the main page about 50 times a day.  During the weekend, I go through withdrawls when nothing new gets posted for a day.

Tue, 06/03/2014 - 17:46 | 4821329 NeedtoSecede
NeedtoSecede's picture

The truth will set you free saltedGold! 

I still miss some of the old school ZHers like Francis Sawyer, Trav and several others who were forced out, or decided to leave.  I may not have agreed with them on everything, but they would bring it with every comment, and they didn't hold back.  Made you think and challenged you to dig even deeper.

Still love Knuckles, Meat Hammer (you still around Hammer?), pods, DCRB and several others.  I must admit I have a crush on kchris.  It sends a "chill up my leg" whenever he/she speaks lovingly of his/her guillotine.

Tue, 06/03/2014 - 14:59 | 4820890 Mesquite
Mesquite's picture

Tue, 06/03/2014 - 14:19 | 4820775 Da Yooper
Da Yooper's picture

I have plenty of trees bring bankers & rope

Lets have a party like they did in the old west

Tue, 06/03/2014 - 17:45 | 4821323 ZH Snob
ZH Snob's picture

they will manipulate their way to obsolescence, and for those of us who are up for this battle they are also arming us with all the PMs we continue to scoff up at bargain prices.  sunset is coming for this band of thieves.  of course, they will just adjust to the new system and try their best to game that one too, but it won't be as easy.  trust in paper products will be close to nil.  they will have to put up or shut up, just like everyone else.

Tue, 06/03/2014 - 22:09 | 4821932 StychoKiller
StychoKiller's picture

"I didn't know the gun was loaded!  Well okay, I knew the gun was loaded, but I didn't think it'd kill..."

Wed, 06/04/2014 - 01:02 | 4822288 TheReplacement
TheReplacement's picture

Change a few words and this is a conversation about the mafia.

Tue, 06/03/2014 - 14:06 | 4820724 Sudden Debt
Sudden Debt's picture

Rumor has it that jelow futures are... also... fixed...
WHAT'S GOING ON HERE?!?!?!?

Tue, 06/03/2014 - 14:43 | 4820847 chapaev's ghost
chapaev's ghost's picture

Financial markets are FIXED and RIGGED???

Next you'll be telling me that politicians are corrupt lying shitags.

And then, you'll reveal that the FED is a private corporation and that bankers are screwing us!

If I don't put a stop to your malicious truth-telling, you'll reveal that 9/11 was an INSIDE JOB!!!!

Will I have to endure the discovery that I am nothing more than a chattel bondsman, held as property by the Queen of England through a corporate entity known as the UNITED STATES????

WHERE WILL IT STOP???

 

Do NOT follow this link or you will be banned from the site!