Gold is now the latest bank price-fixing scandal

Are banks taking their cut of gold?
Are banks taking their cut of gold?
Image: Reuters/Michael Buholzer
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As if there weren’t enough reasons to cast a jaundiced eye on the banking system, Bloomberg reports that several international banks are now accused of manipulating a key benchmark, known as the gold fix, in the $20 trillion gold market. The charges of fixing gold prices in London are being leveled at Barclays, Deutsche Bank, ScotiaMocatta (the metals-trading division of Canada’s Scotiabank), Société Générale, and HSBC by New York resident Kevin Maher, who filed a lawsuit against the banks in a US federal court yesterday evening (Mar. 4). The lawsuit follows a draft research report published last week by  New York University Professor Rosa Abrantes-Metz and Moody’s Investors Service analyst Albert Metz, noting unusual patterns in the gold benchmarks.

The allegations mark the latest knock to global banks’ role as rate setters in key areas. Most recently some 15 banks and more than 20 traders have been facing a worldwide probe into charges that they’ve been manipulating exchange rates. A month ago New York’s top financial regulator, Ben Lawsky jumped into the fray, launching a probe into forex manipulation against banks chartered to operate in New York.

All of these shenanigans follow what has so far been the granddaddy of bank scandals: the manipulation of Libor, the London interbank offered rate. At least half a dozen banks, including UBS, Barclays, Deutsche Bank and Citigroup, have been slapped with multi-billion dollar penalties over charges that they colluded to rig Libor rates, which help to set interest rates on everything from credit cards to mortgages.

Although it’s unclear where this next round of charges will lead, they’re yet another blow to the banks’ already battered images. And if the Libor and forex cases are anything to go by, banks may have to fork over billions in penalties to settle these new allegations, if they prove true.