Banks Investigated for Possible Precious Metals Rigging (Again)
According to an article in Business Insider, the US Department of Justice and the Commodity Futures Trading Commission are investigating 10 major banks for possible rigging of the precious metals markets, as reported by the Wall Street Journal. (Source: Business Insider 2015 Feb. 24th)
According to the story, prosecutors are analyzing the price setting process for Platinum, Palladium, Gold and Silver in London. The CFTC has also opened up a civil investigation. The banks which are said to be under scrutiny include: HSBC, Bank of Nova Scotia, Credit Suisse Group, Deutsche Bank, Goldman Sachs Group, JPMorgan Chase, Societe Generale, Standard Bank Group and UBS.
Misconduct by Banks seems to be the New Normal.
European regulators dropped a similar probe against big banks after finding no evidence of wrongdoing. However, last year a fine was levied against Barclays of $40.2 million by the FCA for lax controls after one of its traders allegedly manipulated the Gold fix. (Source: ZeroHedge 2015 Feb 23rd) With so many banks possibly involved it will be unlikely that US regulators will take much action other than big fines.
We wrote an article not to long ago about the record fines and fees that have been imposed on financial institutions since the financial crisis of 2008. Without any real significant penalty, large banks have no incentive to play by the rules. Especially when profits are held as the number one value.
Even Janet Yellen, the Chair of the US Fed, said recently "there may be pervasive shortcomings in the values of large financial firms that might undermine their safety and soundness.” (Source: CNBC 2015 March 3rd) Banks still have the upper hand in the financial trading markets, but at some point the the tide will shift.
The Timing of China’s new Gold Fix
The new probe by the US DOJ brings clarity as to why China is launching a new Gold benchmark on the Shanghai Gold exchange this year. For a country that has been investing so much in Gold it makes sense that China would not want to rely exclusively on the West for a price setting mechanism.
Many financial experts have said that you can only manipulate markets for so long. Eventually the asset that is being manipulated will find its true underlying value. So even if nothing comes of this recent probe into precious metals rigging by the DOJ, eventually the fundamentals for Gold and Silver will assert themselves. When this happens it will mean much higher prices.
|Older China Plans Yuan Denominated Gold Fix||Newer Gold’s Decline: Keeping things in Perspective|