Deutsche Bank is accused of conspiring with the Bank of Nova Scotia,
Barclays, HSBC, Societe Generale and UBS to manipulate prices of gold. It was
also sued along with the Bank of Nova Scotia, HSBC and UBS for manipulating
prices of silver. Gold and silver futures traders accused the banks in 2014
of rigging the so-called London
Gold Fix and Silver
Fix at the expense of them and their clients. According to the
plaintiffs’ claims, the banks abused their position setting silver and gold
fixes to reap profits from trading and hurting other investors who use the
rigged benchmark.
The traders’ lawyers disclosed the settlements in letters filed with a
Manhattan federal court. The deal will include monetary payments by Deutsche
Bank. Interestingly, the German bank also agreed to cooperate fully in
pursuing similar claims against other banks.
What does Deutsche Bank’s settlement imply for the gold market? Well, not
much, since the London Gold Fix and Silver Fix were
already reformed in 2015 to increase transparency in the precious metals
market. Deutsche Bank was sued in 2014 and in the same year left the precious
metals fixing mechanism. However, the Western banks’ credibility may vanish
and therefore some investors may look more favorably at the Shanghai Gold
Benchmark Price, which just
launched.
We can also witness more litigation in the gold market, since the
settlement may encourage other investors to launch their own lawsuits
(indeed, some class actions lawsuits have already been filed in Canada).
Last but not least, Deutsche Bank’s settlement will be the grist for the
gold bulls’ mill. The believers in the long-term manipulation of the price of
gold will be saying: “Oh, you see, we told you so!” However, the news does
not provide any proof that the price of gold was systematically suppressed.
Surely, the banks could manipulate the precious metals fixing prices, but
these price distortions should be short-lived. As we wrote in the February
Market Overview: “we do not deny that there are attempts of manipulation
which may cause very small and short-lived changes in the price of gold, or
that all market participants in a market act honestly. However, such
interventions are not the same as the massive, coordinated, multinational,
systematic and decades-long plot to suppress the price of gold”. Deutsche
Bank’s settlements prove the first type of manipulation, but it is something
different from the systematical suppression being able to affect the
long-term trends in gold prices. Investors should remember that manipulators
do not care about the long-term direction of the price as long as they make
money – they can earn profits both during bull
and bear
markets.
If you enjoyed the above analysis, we invite you to check out our other
services. We focus on fundamental analysis in our monthly Market
Overview reports and we provide daily Gold &
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Disclaimer: Please note that the aim of the above
analysis is to discuss the likely long-term impact of the featured phenomenon
on the price of gold and this analysis does not indicate (nor does it aim to
do so) whether gold is likely to move higher or lower in the short- or medium
term. In order to determine the latter, many additional factors need to be
considered (i.e. sentiment, chart patterns, cycles, indicators, ratios,
self-similar patterns and more) and we are taking them into account (and
discussing the short- and medium-term outlook) in our trading alerts.
Thank you.
Arkadiusz Sieron
Sunshine Profits‘ Gold News
Monitor and Market Overview Editor
Gold News Monitor
Gold Trading Alerts
Gold Market Overview
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