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Are banks rigging the gold and silver price?

For many years most of the perennially bullish precious metals commentators, led in terms of continuing vehemency on the matter by the Gold Anti Trust Action Committee (GATA), have been claiming that precious metals prices are being heavily manipulated by the big commercial banks in collusion with the U.S. Fed and other central banks.

And they cite as evidence various documentation, mostly quite old, obtained under freedom of information requests, together with some seemingly very strange volume and price movements on the COMEX markets at potentially key inflection points for precious metals prices, as well as the huge short positions held in all four major precious metals by a small group of major banks in particular.

It has always been the gold bulls’ gripe that the evidence they have come up with has been totally ignored by the mainstream media, but is this all changing?

In a key article published on Monday this week, perhaps arguably the most prestigious globsl mainstream financial newspaper of all, the Wall Street Journal, reported that at least 10 major global banks are being investigated for precious metals market rigging by the U.S. authorities.

The paper notes specifically that it has received reliable information that prosecutors in the Justice Department’s antitrust division are scrutinizing the benchmark price-setting process for gold, silver, platinum and palladium in London, while the Commodity Futures Trading Commission has opened a civil investigation, presumably into activities on the major commodities markets.

The newspaper reports that the mega banks under investigation include HSBC from the UK, which confirmed as much in the bank’s latest annual report also issued on Monday, JP Morgan Chase and Goldman Sachs from the U.S., Bank of Nova Scotia from Canada, Barclays and Standard Bank from the UK, Credit Suisse and UBS from Switzerland and Société Générale from France.

It seems likely that others may be drawn into the investigations as well.

While some of the investigations revolve around the rather archaic London Gold Fixing system, which is being replaced from next month by a new electronic process, it is worth pointing out that a recent investigation into this by the U.K. and German authorities found no evidence of wrongdoing.

There does seem to be a fair amount of circumstantial evidence that there is at least a degree of price rigging on the major commodity markets by the big money.

This is both in terms of the short positions held, and the need to protect them, and also in the futures markets, particularly for gold and silver, where enormous paper trades are put in place which would seem to have no other purpose than an attempt to influence physical pricing.

However the scope and focus of any official enquiry may be key in whether these specifics are duly investigated or not. Some previous CFTC investigations appear to have fallen short in this respect (the manipulation theorists again suspect collusion) and there’s no guarantee that any new investigation will be any different. But at least the possibility that the big money managers (the mega banks) might actually try to manipulate markets to their advantage has at last reached the attention of the mainstream media. It’s a start!