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From Jefferson Companies Gold Newsletter:
Don’t expect much from Justice probe of gold-market rigging
By Brien Lundin
The good news is that manipulation of the gold market has finally come under investigation by the authorities, with the U.S. Justice Department opening up an investigation into 10 major banks.
The bad news is that the investigation is centering around potential rigging of the daily price fixings for gold, silver, platinum and palladium. I know that a number of my colleagues in the hard-money industry may disagree, but I don’t think this amounts to a hill of beans in the big picture.
According to the Wall Street Journal, the Justice probe is centering around the actions of Bank of Nova Scotia, Barclays PLC, Credit Suisse Group, Deutsche Bank, Goldman Sachs Group, J.P. Morgan Chase, Societe Generale, Standard Bank Group, and UBS in the once- or twice-daily setting of the price benchmarks through conference calls involving representatives of a few banks on the various fix-setting committees.
Precisely because of allegations of collusion or manipulation of the process to benefit trade positions – often in conflict with a client’s best interests – the long-held processes for setting the daily fixes for precious metals have been completely reformed.
Many believe this to be a very big deal, since everyone in the supply chain from mines to bullion dealers use the fix, and it’s the basis for many financial products and investment analysis.
But this issue never concerned me, for a couple of reasons.
First, the magnitude of the manipulation could never have been large – just a few pennies in either direction – or the manipulators would have exposed their actions. Plus, they couldn’t move the market much in any case, and the natural forces affecting the price would restore the proper order quickly after any rigged price fix.
Second, of course the process was manipulated. Can you imagine setting up an exclusive club of a few traders, allowing them to trade millions based on a price fix, and then putting them onto a conference line to help set that fix … and have them not move the price to their benefit?
And yet we are supposed to be shocked – shocked! – that the price fix isn’t completely objective?
No, my greater concern is the level of longer-term price manipulation, being accomplished by either the central banks or deep-pocketed institutions, acting either in concert or simply with the same motivations.
So while you’ll see a lot of outrage in the blogosphere over this investigation, unless it turns up documentation of a broader strategy of manipulation, there’ll be nothing to see here. Move on.
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From the Gold Anti-Trust Action Committee:
U.S. government authorized to rig all markets in secret
Western governments are legally authorized to rig all markets in secret and as a result investigations of market rigging by the investment houses central banks use as intermediaries are not likely to produce anything, GATA secretary/treasurer Chris Powell tells King World News in an interview.
Elaborating, GATA documented consultant Reginald Howe’s gold market-rigging lawsuit in U.S. District Court in Boston in November 2001, at which an assistant U.S. attorney asserted that the U.S. government has the power under the Gold Reserve Act of 1934 to rig the gold market through intervention by the U.S. Treasury Department’s Exchange Stabilization Fund, a hearing about which Powell reported here.
The Treasury Department acknowledges its authority for secret market rigging here.
The interview’s excerpt is posted at King World News here.
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From BullionStar.com:
The first gold riggers: Nixon and Pompidou in 1971
President of France Georges Pompidou, President of the United States Richard Nixon and National Security Adviser of the United States Henry Kissinger met on Dec. 13 and 14, 1971, at the Azores to negotiate the value (rigging) of gold and all other major currencies in the world at the time.
Three months prior to the meeting, Nixon had halted the convertibility of U.S. dollars into gold for foreign nations at the U.S. Treasury. The French were the most vocal critics of the United States’ flexible monetary policy, or what some people call endless money printing.
Read the entire essay by metals analyst Koos Jansen here.
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From Reuters:
BNY Mellon in settlement talks over forex fraud
Bank of New York Mellon Corp. is in settlement talks with the U.S. Justice Department and New York attorney general over claims the bank defrauded clients in foreign exchange transactions, according to sources familiar with the matter.
BNY Mellon last week revealed that it would take a $598 million charge as it sought to resolve matters including “substantially all” foreign exchange litigation it faced, though it did not specify which cases.
The bank faces several lawsuits, including class actions, stemming from allegations that it misled clients about how it determined currency exchange rates for certain transactions.
The Justice Department, which has a lawsuit against BNY Mellon pending in Manhattan federal court, is engaging in settlement talks, a person familiar with the matter said.
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From the New York Sun:
Janet Yellen’s audit
It strikes us that it was passing strange for Chairman Janet Yellen to wave a copy of the central bank’s audited financial statement as a prop in answering Congress on Sen. Rand Paul’s “Federal Reserve Transparency Act.” She did this at the hearing of the Senate Banking Committee. Her suggestion that a standard financial audit is what the Transparency Act is all about was almost contemptuous. So was her suggestion that the bill that has already twice passed the House – September’s bipartisan vote was 333 to 92 – is somehow designed to politicize monetary policy.
Just to underline the point, what Mrs. Yellen held up was an audited report of the kind that is done by accountants using green eyeshades. What the Congress wants is a look not only at the books but also at the Fed’s holdings and minutes and transactions overseas.
It is not an attempt to interfere with Fed policy. It is an attempt to find out what the Federal Reserve is doing. It’s just shocking that the Federal Reserve would want to deny to its creator this kind of inspection once every, oh, say, century.
Particularly on this morning, when the world is digesting the Wall Street Journal’s astonishing scoop about how the Justice Department is investigating trading by “at least 10 major banks” for rigging the market in gold and other precious metals.
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From GoldMoney.com:
As world economy sinks, more financial repression
GoldMoney research director Alasdair Macleod notes that his forecast in January for a decline in the world economy has been vindicated and that, as a result, “we can expect accelerated money printing and the imposition of more negative interest rates in a forlorn attempt to avert economic reality.” That is, more “financial repression.”
Macleod’s commentary is headlined “Global Economic Outlook – Update” and it’s posted at GoldMoney.
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From King World News:
Gold cheaper in real terms now than in 2002
Swiss gold fund manager Egon von Greyerz tells King World News that gold is cheaper today in real terms than it was at $300 in 2002, even as the monetary metal has become far more strategic in international affairs.
An excerpt from his interview is posted at the KWN blog here.
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From Bloomberg.com:
Russia stops gold-buying spree after prices soared in January
Russia stopped buying gold for the first time in 10 months after prices had the biggest increase on record.
Gold reserves were unchanged at 38.8 million ounces, or about 1,207 metric tons, as of Feb. 1 from a month earlier, the country’s central bank said on its Internet site. Bullion priced in rubles climbed 35 percent last month, the most in data going back to 2000. In dollar terms, the increase was the biggest in three years.
Higher gold prices “probably helped sway the central bank from adding to existing holdings,” Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Copenhagen, said by e-mail. “They may be price-sensitive, just like we have seen with other major buyers in the past.”
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