Authorities around the world are gradually piecing together a shocking
picture of how banks have manipulated benchmarks that influence the
price of everything from mortgage loans to foreign currencies.
Another area deserves their scrutiny: gold and silver.
In recent weeks, Bloomberg News and others have reported on
concerns, among market participants and regulators, that the process
for establishing the price of gold may lend itself to insider trading
and other forms of
unfair dealing. The available evidence strongly suggests manipulation
and, given the structure of the market, possibly collusion.
The price-setting mechanism, known as the fixing, provides an easy
vehicle for manipulation. Twice every business day in London,
representatives of five banks and some select clients participate in a
phone call in which offers to buy and sell gold are put forward. These
calls determine the morning and afternoon gold fixings, which serve as the benchmark for trillions of dollars in transactions around the world. Silverfixings work similarly, with only three banks involved.
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