While trading during more active periods such as the afternoon fixing can explain larger price moves, the swings are often bigger than when floor trading starts on the Comex bourse in New York at 8:20 a.m. for instance, said Abrantes-Metz.
Since the fixing began taking place by conference call in 2004, rather than in a room in an office, it could be easier for banks to simultaneously trade in the market during the process, she said. Trading ingold derivatives expanded since 2004 and the potential gains from manipulating the fixing expanded as a consequence, she said.
“It’s clear to me that prices are predominantly going down,” said Abrantes-Metz. “If the argument is that someone is selling, my question is who is buying, and who benefits from prices going down to an extent that could be driving them further down? We should have a fix that’s based on actual trades that are visible to the market. We need to reduce the ability to manipulate it, independently of whether or not it has already been abused.”
Kevin Maher, a New York resident who says he bought and sold gold and gold futures and options, sued March 4 in Manhattan federal court claiming the banks overseeing the fixing colluded to manipulate it. He’s seeking to represent a class of all investors who, from 2004 to now, held or tradedgold and gold derivatives that were priced based on the fix or who held or traded Comex gold futures or options. He’s seeking unspecified damages on behalf of the class.
A spokesman for Barclays and a spokeswoman for HSBC declined to comment on the lawsuit and Renee Calabro, a spokeswoman for Deutsche Bank, said “we believe this suit is without merit and will vigorously defend against it.” A spokesmen for Bank of Nova Scotia didn’t immediately respond to requests for comment.
“Societe Generale appears to have been named as a defendant in these proceedings together with other members of the London Gold Market Fixing Ltd.,” according to a statement e-mailed by the Paris-based bank. “The claims are unsubstantiated” and Societe Generale will defend against the proceedings, it said.
Officials at Barclays, Deutsche Bank, HSBC and Societe Generale declined to comment last week on the report by Abrantes-Metz and Metz. Joe Konecny, a spokesman for Bank of Nova Scotia, didn’t respond to requests for comment at the time.
The gold fixing has faced scrutiny in recent months, with regulators in London, Bonn and Washington -- who are already looking into manipulation of interest rates and currencies -- investigating how prices are set in the market. About $19.6 trillion of gold circulated globally in 2012, according to CPM Group, a New York-based research company.
Officials from Bafin, Germany’s financial markets regulator, interviewed Deutsche Bank employees as part of a probe into potential manipulation of gold and silver prices, Bloomberg News reported in December.
The U.S. Commodity Futures Trading Commission discussed in private meetings last year reviewing how gold prices are set, Bloomberg News reported in November. The U.K. Financial Conduct Authority is also scrutinizing how prices are set.
The banks involved in the fixing will appoint external advisers to consider changes to the process, a person familiar with the matter said in January, asking not to be identified because the matter is private.
The fixing “is not perfect, but it’s still pretty good,” Norman said. “A little more transparency on the process as it occurred would be beneficial. It’s not good enough to be good, you’ve got to be seen to be good.”