SAN FRANCISCO--(BUSINESS WIRE)--The national plaintiffs’ law firm Lieff Cabraser Heimann & Bernstein, LLP announces an investigation of alleged price manipulation in the gold market and a widely-used benchmark, commonly known as the “London Fix”. If from 2004 to the present you purchased or sold physical gold, or invested in gold derivatives that settled or marked-to-market based on the London Fix, or purchased or sold gold derivatives on COMEX, including futures and options, you were likely harmed by manipulation of the market price of gold. In that case you may seek recovery of your losses.
Gold investors who wish to learn more about the action should click here or contact Bruce Leppla of Lieff Cabraser toll-free at 1 800-783-0709.
Background on the Gold Fix Investigation
Financial benchmarks have been under heightened scrutiny in the wake of the LIBOR scandal. Among those is the London Gold Fix, a benchmark gold price set by five banks in London. On February 28, 2014, Bloomberg News reported that the same academics who uncovered the LIBOR manipulation had investigated the gold fixing process and found empirical evidence consistent with manipulation (the study is currently unpublished). Bloomberg reports that the gold market is worth $20 trillion annually.
Twice a day in London, traders from Barclays, Deutsche Bank, Bank of Nova Scotia, HSBC, and Société Générale have a conference call to set the Gold Fix.
The call begins with the current spot price of gold, and it is adjusted up or down based on the banks’ bid/ask order book requests. The price is “fixed” when buy orders match sell orders (within 50 quantity units). Bankers buy and sell gold based on clients’ orders and also from their own books. Bankers and their clients may adjust their orders during the fixing. The call is hosted by a chairman, which rotates among the member banks. Société Générale currently chairs the call.
Bloomberg reports unusual price movements beginning in 2004 and through 2013. In particular, the study found that prices consistently spiked downwards during the afternoon call. Bloomberg reports:
On days when the authors identified large price moves during the fix, they were downwards at least two-thirds of the time in six different years between 2004 and 2013. In 2010, large moves during the fix were negative 92 percent of the time, the authors found. There’s no obvious explanation as to why the patterns began in 2004, why they were more prevalent in the afternoon fixing, and why price moves tended to be downwards.
Given the nature of the fixing process, the gold fixing banks have a substantial information advantage over the rest of the gold market. Bloomberg reported in November 2013 trading surges to nearly 50% above average during the fixing calls, which may be indicative of insider trading. Trading during the fixing period was a strong predictor of the movement in gold prices. Volume immediately after the fixing calls dropped.
The Commodities Futures Trading Commission, the U.K.’s Financial Conduct Authority, and Germany’s Federal Financial Supervisory Authority, are all reportedly investigating the manipulation of this benchmark.
The London Gold fix is a widely used benchmark that sets prices globally. According to London Bullion Market Association, the Fix is used to price gold in industrial contracts, as well as an instrument in gold swaps and options contracts. It is also used to value gold holdings.
Jewelers, gold dealers, and mining companies would be impacted by artificial prices. Purchasers are harmed in the minority of instances in which the fix is inflated. Sellers and users of the fix for valuation purposes are harmed more often – as it appears that the fix was more often suppressed.
Holders of gold derivatives would be harmed by manipulation up or down, depending on the net position of their contracts. The gold fix is used to settle financial contracts in the gold market.
About Lieff Cabraser
Lieff Cabraser Heimann & Bernstein, LLP, with offices in San Francisco, New York, and Nashville, is a nationally-recognized law firm committed to advancing the rights of investors and promoting corporate responsibility.
The National Law Journal has selected Lieff Cabraser as one of the top plaintiffs’ law firms in the nation for the last eleven years. In compiling the list, the National Law Journal examined recent verdicts and settlements in addition to overall track records. U.S. News and Best Lawyers have also selected Lieff Cabraser as one of their national law firms of the year for the past four years.
For more information about Lieff Cabraser and the firm’s representation of investors, please visit http://www.lieffcabraser.com.
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