Feds Target 10 Big Banks for Possible Price Rigging in Precious Metals

Photo (cc) by BullionVault

At least 10 big banks are facing a probe by the U.S. Department of Justice and the Commodity Futures Trading Commission for allegedly rigging the prices of precious metals.

According to The Wall Street Journal, DOJ prosecutors are looking into the process used to set prices for gold, silver, platinum and palladium, while the CFTC has opened a civil investigation.

The government is scrutinizing HSBC Holdings PLC, Bank of Nova Scotia, Barclays PLC, Goldman Sachs Group Inc., Credit Suisse Group AG, J.P. Morgan Chase, Standard Bank Group Ltd, UBS AG, Societe Generale SA, and Deutsche Bank AG.

The WSJ said:

The precious-metals probes are the latest example of regulatory scrutiny into how the world’s biggest financial institutions influence widely used benchmarks. Until last year, prices for gold, silver, platinum and palladium were set using a decades-old practice of once- or twice-a-day conference calls between a small group of banks. The process for setting each of the price “fixes” has since been overhauled.

The price benchmarks impact the price of jewelry, as well as financial products such as exchange-traded funds, the WSJ reports.

Precious metals have value for reasons that are based in history and psychology as well as utility. Gold continues to be viewed as a medium for preserving wealth, though it is also an excellent conductor, according to Hard Assets Investor. Silver has a wide array of industrial uses, including water purification, electronics, solar panels, medical devices and batteries, it said. Platinum, like silver and gold, is used in jewelry, but the bulk of it is used in industry.

According to Reuters, German regulator BaFin recently conducted a similar investigation but didn’t find any benchmark price manipulation in precious metals.

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