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Deutsche Bank and the Gold Price Fixing Scandal

20 Feb 2019 - Archive Gold

The Deutsche Bank has paid $60 million dollars to settle a lawsuit with investors who alleged that the bank manipulated gold prices. The bank denied doing anything wrong and hasn’t yet commented on the lawsuit. Investors have also sued other banks, accusing them of also rigging the price. The four other banks were; Barclays Plc, Bank of Nova Scotia, HSBC Holdings Plc and Société Generale. United States District Court Judge Valarie Caproni, who is presiding over the case, said the lawsuit could proceed against the other banks. Today, we’ll examine this case, looking closer at the allegations and the potential impact that they could have on the gold market.

Recently the Deustsche Bank also admitted to rigging the silver price, using an allegedly similar method. It was alleged that the banks used their power to control the markets. By knowing where the market would be moving, they could profit from its movement. Investors claim that this manipulation has cost them money. It’s alleged that they manipulated the market using spoof orders. This is where a genuine offer is placed onto the market accompanied by another offer, which is far enough from the current price to avoid being executed. Once the genuine offer has been accepted, the spoof is quickly cancelled. This creates a false sense of supply and demand. By spoofing the banks could control the price movement, tricking traders into accepting their offers. While this method has been made more difficult due to changing technologies, if the spoof is completed fast enough, it can be performed successfully. Smaller markets like silver and gold can be more easily manipulated than larger markets, because of the smaller amounts of active traders. This can make these markets targets for manipulative activities. Understandably, this has many investors in gold concerned as they ask what does this mean for the gold market?

After Deutsche Bank reached a $60 million settlement with investors who alleged that they conspired with other banks to ‘fix’ the price, many investors were concerned about the future of the gold market. While there is no guarantee that this lawsuit will prevent banks from engaging in these actions in the future, it might make them reconsider their actions. Hopefully, it will make regulators more aware of the flaws in the market and how they might be exploited. A lawsuit like this may be the catalyst needed to improve market security and reduce the chances of future market manipulation. So, while traders are right to be concerned about the number of banks involved and the tactics they allegedly used, they shouldn’t abandon the gold market. Gold remains one of the most popular commodity markets in the world and while investor confidence may be shaken slightly, the price for gold continues to increase. In times of economic or political uncertainty gold is still considered to be a safe investment.