“Is the gold price really being manipulated?” readers have asked for many long years. Well now we all know. Last week the Financial Conduct Authority fined Barclays Bank £26 million for manipulating the London Gold price fix. According to media reports, they did this the day after they were fined for manipulating Libor – you couldn’t make this stuff up. In reality, this manipulation had been going on for a long time but it sure made for better headlines linking the headlines together. The trader concerned, a certain Daniel Plunkett, has since been banned from trading but the manner in which this was carried out suggest to me there’s a lot more gold manipulation going on.
The FCA report on gold manipulation said:
Mr Plunkett placed orders during the 3:00 p.m. Gold Fixing on 28 June 2012 with the intention of increasing the likelihood that the price of gold would fix below a certain level, preferring his interests over those of Customer A.
In particular, he placed a large sell order of between 40,000 oz. (100 bars) and 60,000 oz. (150 bars) with Barclays’ representative on the Gold Fixing, then withdrew it completely one minute later and subsequently placed another large sell order of between 40,000 oz. (100 bars) and 60,000 oz. (150 bars) two minutes after that.
These orders contributed to the price of gold fixing at a level which was lower than the Barrier specified in a digital options contract that the firm had previously entered into with Customer A. As a result, Barclays did not have to make a USD3.9m payment to Customer A.
In reality, customer ‘A’ it transpires complained to Barclays that the gold price had been manipulated and was paid the $3.9 million he was owed. How many others did NOT know and did not complain though?
Meanwhile gold remains in a very narrow price range. As I write, the gold price in sterling is hovering around £760 – 770.