London Gold-Fix Banks Accused of Manipulation in US Lawsuit
A file photograph of Britain's Queen Elizabeth touring a gold vault during a visit to the Bank of England.Reuters

Five banks including Barclays, Deutsche Bank and HSBC have been accused in a US lawsuit of manipulating the London gold fix, an age-old pricing of gold twice daily.

According to a Bloomberg report, Kevin Maher, a New York resident who said he bought and sold gold and gold futures and options alleges that the banks overseeing the gold benchmark - Societe Generale and Bank of Nova Scotia were also named - colluded to manipulate it.

Maher is seeking to represent a class of all investors who held or traded gold and gold derivatives that were priced based on the London gold fix from 2004 to the present, or who held or traded COMEX gold futures or options.

Maher is seeking unspecified damages on behalf of the class. Damages may be tripled under US antitrust law.

Maher's complaint cited press reports, including a Bloomberg report about a draft research paper that highlighted alleged unusual trading patterns connected to the London gold fix.

The research paper looking into possible manipulation of the benchmark was authored by New York University's Stern School of Business Professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody's Investors Service.

London-based Barclays and HSBC refused to comment on the lawsuit.

Spokesmen for Paris-based Societe Generale and Toronto-based Bank of Nova Scotia did not immediately respond to requests seeking comment.

"We believe this suit is without merit and will vigorously defend against it," Renee Calabro, a spokeswoman for Frankfurt-based Deutsche Bank told the news agency.

"The academic paper cited in media reports is not a Moody's research report. The co-author of the paper was writing independent of his position at Moody's and was representing his own research findings and viewpoint," a Moody's spokesperson told IBTimes UK in an email last week.

FCA and Bafin Probes

The UK's Financial Conduct Authority is examining how prices are calculated. The regulator published a report last week detailing its remit for regulating commodities including gold, saying that while it is responsible for commodities derivatives, it does not regulate physical commodities.

Meanwhile, South Africa's Standard Bank could replace Deutsche Bank's in the global gold price-setting process, Reuters reported in February.

Deutsche Bank, Germany's biggest lender, said in January that it would withdraw from the panels determining the gold and silver fixings. German financial markets regulator Bafin interviewed the Frankfurt-based bank's staff as part of a probe into the probable manipulation of gold and silver prices.

The London-fix is used to determine the prices of gold the world over. The fix is calculated twice a day on telephone conferences at 10:30 hrs and 15:00 hrs London time. The calls usually last 10 minutes but can last for more than an hour.

Prices are adjusted up and down until demand and supply are matched, at which point the gold price is declared "fixed".