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Gold – the new LIBOR scandal?

According the Globe and Mail, March 26, 2014 B13, the world has been as naive in how it lets gold prices be fixed as it was with the LIBOR for worldwide interest rates, mortgages and securities, and recent investigations suggest price fixing may have occurred here as well. (Reuters Breakingviews, “Flaws in the fix: Why gold pricing system needs reform”)

The ‘system’, as described, is so chummy and ‘casual’ that it is beyond belief!

Twice a day at 10:30 GMT and 15:00 GMT, just five (5) bank executives  – from Barclays, Deutche Bank, HSBC, Societe Generale and Canada’s own Bank of Nova Scotia [notice American banks and Japanese or Chinese or Indian banks are absent] get together and fix the market benchmark for gold.

These ‘private conference calls’ are not recorded nor are details published. There is no oversight by any third party from government or the World Bank or the International Organization for Securities Commissions.

The price fixing usually takes only 4 to 15 minutes according to the article, but it seems that information leaks are common as reflected in price jumps or drops during or by the end of the session.

On March 3, a U.S. lawsuit was filed accusing the 5 banks of collusion in manipulating the price of gold for the last 10 years !!!!

LIBOR all over again!!!