Is London Manipulating Gold and Silver Prices?

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As we've explained before, manipulation of gold and silver prices is happening right here in the United States.

Our Global Resources Specialist Peter Krauth interviewed silver market analyst Ted Butler last year, who explained how big financial institutions were using high-frequency trading to depress silver prices.

And earlier this month, Money Morning Chief Investment Strategist Keith Fitz-Gerald detailed how these same big firms were toying with retail investors in the gold market.

Now, in the wake of the Libor scandal in London, which involved the rigging of interest rates by certain banks, it looks like prices in other markets such as gold and silver could be being rigged in a similar fashion.

Widespread Rigging in Markets

Bart Chilton, commissioner of the CFTC (Commodity Futures Trading Commission), spoke last month about possible 'fixing' of prices in other markets besides interest rates.

"Why would they [other markets] be any different in the minds of those that may have sought to push or pull rates?" he wrote in a CFTC statement. "Given what we have seen in Libor, we'd be foolish to assume that other benchmarks aren't venues that deserve review."

Chilton believes these other markets "are legit areas of inquiry," and "every single market needs to be reviewed, and potentially investigated."

Another group questioning gold and silver price manipulation is the International Organization of Securities Commissions. In a recent paper, it stated that "the risk of manipulation will be greater where participants. . .have both incentive and opportunity to submit inaccurate data or apply a methodology inaccurately."

The organization added that the problem is particularly acute "where judgment is required in determining the data to be submitted."

In other words, it's possible people will put forth data that will make them the most money possible…

"Fixing" Gold and Silver Prices

Turning specifically to the gold market, the price of gold has been "fixed" in London twice a day.

The practice has been in place since 1919 and the fixing is done by only five banks: Barclays Plc, HSBC Holdings Plc, Deutsche Bank AG, Societe Generale SA and the Bank of Nova Scotia. It takes place over the phone, a practice started in 2004.

The "fixing" of the silver price in London, which is "fixed" once a day via phone, is conducted by an even smaller group of banks: HSBC, Deutsche Bank AG and the Bank of Nova Scotia.

In light of Libor scandal, the CFTC is now studying various aspects of the fixings in London for gold and silver prices. It is believed the Commission is looking at whether the fixings are conducted in a proper manner and with enough transparency.

Some investors are already nervous about London's gold and silver markets since admission that the ratio between metal traded and metal actually existing in London's bullion market is 100 to 1, according to International Business Times.

Across the pond though, the CFTC inquiries are looked at in a different light. The investigation is seen as a way for the United States (Wall Street) to discredit London as a reliable financial center for the world's capital and its banks as a safe custodian. London has a monopoly in the benchmark gold and silver prices and physical gold and silver settlement at the London AM Fix.

Homegrown Scandal

Actually, it would be good to see U.S. regulators pursue possible manipulation here at home as hard as they are pursuing manipulation in foreign markets.

The CFTC enforcement division started looking into possible manipulation of the COMEX silver market in 2008. The aforementioned Commissioner Chilton said in August 2012 that there indeed had been "devious efforts" to move precious metals prices downward through huge short positions held by a few U.S. banks.

Most prominent among these banks in the silver market is JPMorgan Chase & Co. (NYSE: JPM).

The bank recently filed a motion to dismiss a case brought against it for silver price manipulation. The judge presiding over the case is still deciding whether or not to grant the dismissal. The judge is looking for the plaintiffs to provide more direct evidence of manipulation, such as the size of JPMorgan's silver trades on the COMEX, according to Silver Investing News.

If the judge agrees there is something here, then the plaintiffs will be able to obtain JPMorgan records through a court order.

The lead counsel in the case, Christopher Lovell of Lovell Stewart Halebian Jacobsen, told Silver Investing News he's not overly optimistic that the judge will allow the case to go forward.

If not, perhaps the CFTC investigation will continue. After all, the U.S. Attorney General recently said that the large U.S. banks should not be perceived by the public as "too big to jail."

Don't miss Keith Fitz-Gerald's detailed look at how big U.S. financial firms are manipulating the gold market. And for a detailed look at the silver price manipulation happening in the United States, check out this interview Money Morning resources expert Peter Krauth did with Butler Research's Ted Butler.

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Join the conversation. Click here to jump to comments…

  1. garry bell | March 25, 2013

    What about the "honorable" Warren Buffets move to "kill" the price of gold? If anyone at all followed his announced "sell" off of his gold holdings all hell would have happened. Maybe he (the Honorable Warren Buffet) should be looked into!

  2. Jeff Pluim | March 25, 2013

    It is likely that the gold and silver prices are being manipulated. If the judge in the case against JPM just looks at the big picture, and if he has ANY understanding of economics, he will rule in favor of the plaintiffs. With all of the money printing that is going on in the world, and all of the hoarding of gold and silver by sovereign accounts, it is an impossibility that the price of gold and silver would remain as low as they are except for manipulation. The only other option that could keep the prices down where they are, would be if there was a huge amount of the metals coming into the market by either a huge sell-off, as happened when the Russians sold their gold to pay debts in the early 2000's, or if there were huge mining related supply increases. I am not aware of either of these two scenarios, so that would leave price manipulation as the culprit. The motivation for the price manipulation could be be that if the prices of the precious metals is allowed to float freely, you will see a crash in various currencies as there will be a flood into precious metals and away from the currencies, especially the USD.

  3. fallingman | March 25, 2013

    The judge has dismissed the suit.

    I've been active in these markets for 40 years. The LBMA and Comex paper trade stinks to high heaven. But hey, maybe something will come from the perpetual CFTC "investigation" into the rigging of the silver price by JPM. It's only taken them over 4 years so far? Why is that, you might ask? The facts of the situation aren't the least bit complicated.

    The fact that there is wholesale, relentless, officially sanctioned … if not ordered … suppression of metals prices would be clear to a sixth grader given 5 minutes of education and afforded another 5 minutes to look at the data.

    PURE MANIPULATION by the Fed and JPM. Oh, but I repeat myself. JPM IS the Fed.

  4. paul moscoe | March 26, 2013

    I INVESTED IN SILVER SEVEN YEARS AGO. I BOUGHT SILVER CERTIFICATES FROM THE CANADIAN IMPIRIAL BANK OF COMMERCE INVESTERS EDGE AT HEAD OFFICE IN DOWNTOWN TORONTO. I LIVE IN DOWNTOWN TORONTO 3 BLOCKS FROM THE HEAD OFFICE OM BAY STREET. I PAID CASH FOR FOR THOSE TRANSACTIONS. I ALSO BOUGHT SILVER A COUPLE OF YEARS LATTER FROM WORLD WIDE PRECIOUS METALS IN VANCOUVER ON MARGIN. THE PRESIDENT IS JOHN DOWNS. I OWNED 20 THOUSAND OUNCES BETWEEN THE 2 COMPANIES ON OR ABOUT SEPT. 25TH 2011. ON OR ABOUT JULY 2011 I WAS IN LAS VAGAS AND I SAW THE SILVER MARKET DROP ON A SUNDAY NIGHT LATE IN THE MIDDLE OF THE NIGHT FROM JUST READY TO HIT 50 DOLLARS DROP 6 DOLLARS PER OUNCE THAT NIGHT AND THE NEXT DAY OR TWO TO 28 DOLLARS PER OUNCE BACK UP TO 43 DOLLARS THE NEXT DAY. BACK TO SEPT 25TH 2011 I WAS IN CHICAGO ON A HOLIDAY AND THE MARKET DROPED OVER NIGHT AND WAS SOLD OUT BY WORLD WIDE PRECIOUS METALS TWICE WITHIN 3 DAYS WITHOUT NOTICE. I HAVE ALL THE PROOF. THE MARKET WAS MANIPULATED BIG TIME. IF YOU WANT TO CONTACT ME I AM AVAILABLE STARTING ON WEDNESDAY ANYTIME BETWEEN 12 NOON AND 12 MIDNIGHT AT 416 305-4314 IT IS MY HOLIDAY TODAY. WHAT THEY DID TO INVESTORS IN GOLD AND SILVER IS HARD TO COMPREHEND. PAUL MOSCOE

  5. 000059089735 | March 27, 2013

    One should wonder how the World Central Banks (WCB) recent increase in gold buying plays into this. The CBs do not like gold being used as a currency since they do not control it and that reduces their power. Recent CB hoarding of gold at unprecedented levels when the metal is at is highest price is puzzling. Why buy at high prices? It is part of a plan to accumulate enough gold to control the price and create volatility.

    Step 1. Its a well known secret that the WCBs and others have created a fractional reserve situation in gold. They have loaned out their gold and created receivables which have been further loaned out. There is not enough gold to cover all the contracts. This is dangerous because a fractional reserve system only works when you can create money out of thin air. Gold can't be printed.

    Step 2. Create a run on gold. The WCBs will start dumping their gold hoard creating a quick price drop. As folks start panic selling there will not be enough gold to cover the contracts. ETFs that invest in gold certificates and instruments will go bankrupt as they can't redeem their certificates for gold to satisfy the outflows.

    People will flock to the dollar as a safe haven increasing the WCB power.
    Real hold in your hand gold will skyrocket along with gold miners while the value of gold instruments will plummet.

  6. Lew Klein | March 29, 2013

    Pretty sure manipulating goes on..Easy! All the banks have to say to the press that their selling x amount of gold and that sends it down. They really don't sell it. They just say they are.

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