Is Gold Fix Pricing A New Financial Scandal?


Yet another financial scandal is brewing as a legal challenge before a US Federal Court claims a cartel of London banks has fixed the price of gold for the past decade.

The class action for a group of plaintiffs alleges the panel fixed the price of the precious metal and gold derivatives causing losses for investors.

The lawyers intend to argue the gold fixing process is flawed because no official agency oversees the process and that the banks on the price fixing panel cannot trade the metal until the price is set.

At the heart of the dispute is a gentlemanly agreement that dates back almost a century.

Since September 1919, the price of gold has been fixed in London by telephone calls between the banks on the panel.

The five banks on the current panel are Barclays, HSBC, Société Générale, Scotiabank. Deutsche Bank left the panel on May 13, 2014.

Regulators failing investors

To fix the price, the panel chairman suggests an opening figure to the other panel banks. When the figure is agreed, the banks declare they are buying or selling gold – or doing both at the same time.

If they are buying and selling, they must announce how many bars they are trading.

Should no banks wish to buy or demand and supply do not balance, the price is adjusted until the total bought and sold balances.

Kevin Maher, who traded precious metals and precious metals derivatives,  is heading the suit for a group of investors who traded gold and gold derivatives

He claims the US government and regulators are failing investors over how the price of gold is fixed and that the matter should not be left to a select group who may have a conflict of interest as sellers or buyers.

The action has come up on the Financial Conduct Authority radar in London, which is rumoured to be considering a review of how precious metal benchmark prices are set.

Warnings about bogus advisers

The FCA has also issued these warnings about bogus firms posing as regulated financial advisers:

Dealing with an unregulated firm

If you buy shares, save money or invest with an unregulated firm, you lose any protection offered by the Financial Ombudsman and the Financial Services Compensation Scheme. Broadly, you have no independent place to complain if the deal goes wrong and are unlikely to win any compensation.

Checking if a firm is regulated

Go to the Financial Services Register to check if a firm is regulated in the UK.

Reporting a suspected bogus adviser

Find out how to report unauthorised advisers on the FCA web site