A long time ago, in a financial galaxy far, far away, a “fringe” blog raised the topic [9] of gold market manipulation during the London AM fix. Several years later (which, incidentally, is about average in terms of the lag time between when something is actually going on and when the mainstream financial media finally figures it out and reports on it), it was revealed that in fact, shenanigans were likely afoot and indeed, regulators are still trying to sort out what happened.
Via WSJ [10] earlier this year:
The precious-metals probes are the latest example of regulatory scrutiny into how the world’s biggest financial institutions influence widely used benchmarks. Until last year, prices for gold, silver, platinum and palladium were set using a decades-old practice of once- or twice-a-day conference calls between a small group of banks. The process for setting each of the price “fixes” has since been overhauled...
Last year, the FCA fined Barclays £26 million ($40.2 million) for lax controls after one of its traders allegedly manipulated the gold fix at the expense of a client…
Swiss regulator Finma settled last year allegations of foreign-currency manipulation with UBS. The regulator said it found “serious misconduct” among precious-metals traders at UBS, including “front running,” or trading ahead of, the silver-fix orders of one client…
More than 25 lawsuits have been filed against Barclays, Deutsche, HSBC, Bank of Nova Scotia and Société Générale over their alleged role in setting the gold fix.
The ‘fix’ for the ‘fixed’ gold fix (only in the world of corrupt high finance is such a hilariously absurd passage possible) is supposedly a new system whereby the fixings are derived electronically, but as Reuters notes, there’s a new kid on the block when it comes to benchmarking the price of gold. Here’s more:
China conducted trial runs for the planned launch of a yuan-denominated gold fix last month, three sources familiar with the matter said, in a sign the world's second-biggest bullion consumer was moving closer to creating a benchmark price.
The state-run Shanghai Gold Exchange (SGE), on whose international platform the fix will be launched, conducted the trial with major Chinese banks and a few foreign banks, the sources said this week…
China plans to launch a yuan gold fix this year through trading of a 1 kg contract on the SGE, Reuters reported in February.
"The launch of the fix is towards the end of the year ... Banks were invited in April to test the fixing process," said one of the sources directly involved in the process.
The SGE will act as the central counterparty, unlike the London fix where the bullion banks settle trades amongst themselves, the source said.
If the Chinese fix becomes a success, it could add to the pressure on the London benchmark, which is used worldwide by producers, refiners and central banks to price holdings and contracts, although the two could exist side-by-side.
The ironic conclusion: the currency 'manipulating', GDP fabricating, soon-to-be global superpower is now set to challenge the century-old gold price fixing regime which is under fire for being just as corrupt as every other 'benchmark' has proven to be since we first suggested that LIBOR was rigged some six years ago. But don't worry: China promises that yuan hegemony is not something Beijing is interested in establishing.
