For years now, the easiest way to finesse a debate over whether precious metals
markets are manipulated has been to say, "well, if they're not manipulated
they're the only market that isn't."
That was unsatisfying, though, because as the big banks got caught scamming
their customers on interest rates, mortgage bonds, forex and commodities trades,
those markets (presumably) began to operate more-or-less honestly. Gold and
silver, meanwhile, kept right on acting strangely, for instance plunging in
the middle of the night on no news but massive futures volume, to the detriment
of honest investors and traders who naively bet their capital on fundamentals.
The (already huge) amount of money thus stolen from gold bugs kept rising.
So it is with relief that fans of honest markets have greeted the news that
at least one kind of precious metals manipulation has been exposed:
Deutsche
Bank Settles Silver, Gold Price-Manipulation Suits
(Bl0omgerg) - Deutsche Bank AG has reached settlements in lawsuits over
allegations it manipulated gold and silver prices, lawyers for traders of
the commodities said in court filings.
Attorneys for futures contract traders in two private lawsuits said in letters
filed Wednesday and Thursday in Manhattan federal court that the bank has
executed term sheets and is negotiating final details for the accords.
The German financial firm also agreed to help the plaintiffs pursue similar
claims against other banks as part of the settlements, according to the letters.
Vincent Briganti and Robert Eisler, attorneys for traders in the silver-fixing
lawsuit, said Deutsche Bank will turn over instant messages and other communications
to help further their case. Financial terms of the settlements weren't disclosed.
"In addition to valuable monetary consideration to be paid into a settlement
fund, the term sheet also provides for other valuable consideration such
as provisions requiring Deutsche Bank's cooperation in pursuing claims against
the remaining defendants," attorneys Daniel Brockett and Merrill Davidoff
said in their letter Thursday in the gold-fixing lawsuit.
Silver and gold futures traders sued groups of banks in 2014 alleging they
rigged prices for the precious metals and their derivatives. Silver traders
brought claims against Deutsche Bank, HSBC Holdings Plc, Bank of Nova Scotia
and UBS AG. Gold traders additionally sued Barclays Plc and Societe Generale
SA.
The traders alleged the banks abused their positions of controlling daily
silver and gold fixes to reap illegitimate profits from trading and hurting
other investors in those markets who use the benchmark in billions of dollars
of transactions, according to versions of the complaints filed in 2015. Of
those banks, only Deutsche Bank has reached a settlement.
Amanda Williams, a spokeswoman for Deutsche Bank, declined to comment on
either accord. Rick Roth, a spokesman for Scotiabank, the operating name
for the Bank of Nova Scotia, and HSBC spokesman Robert Sherman also declined
to comment. Representatives from UBS, Barclays and Societe Generale didn't
immediately respond to requests for comment.
The silver case is In re: London Silver Fixing Ltd. Antitrust Litigation,
1:14-md-02573. The gold case is In re: Commodity Exchange, Inc. Gold Futures
and Options Trading Litigation, 14-md-2548, U.S. District Court, Southern
District of New York (Manhattan).
Deutsche Bank's plea is of course just the beginning of the story. It will
apparently name its co-conspirators, while providing details on how the scam
was run. This will be interesting and amusing (those instant messages promise
to be classic), especially at a time when those same banks are also in the
news for falling earnings, rising layoffs and exploding loan loss reserves.
But is this gaming of the London precious metals fix the same thing as --
or even tangentially related to -- the main manipulation of the gold price,
which is the practice of central banks "lending" their gold to big commercial
banks, which then sell that gold on the open market to depress the price? These
seem to be two different frauds, and if only the first comes to light while
the second continues unimpeded, there's no reason to expect precious metals
to start trading rationally -- which is to say in line with fundamentals like
soaring global debt, ever-increasing money creation and general geopolitical
and economic instability. At least not until Western central banks run out
of gold.
