A major blow has been dealt to those looking to manipulate the precious metals market, a big first step in creating a fair and balanced playing field. Zerohedge.com is reporting that due to pressure from European regulators (most notably Germany’s BaFin group), Deutsche Bank will be pulling out of the London gold and silver fixing committees. This move will force the London Silver Market Fixing Limited (the ‘Company’) to give up its role as administrator of the London Silver Fixing, effective August, 14, 2014, since it will only have two remaining members.
European regulators have accused precious metal fixers of manipulating the markets and this is removing one of the biggest players. The hope is that the markets will not be manipulated by just a few large agencies, forcing the creation of a more transparent pricing mechanism.
However, not all analysts are expecting a positive result. The Financial Times columnist, John Dizard, has been very critical of those people interested in markets free from manipulation, “…once that satisfying self-righteous feeling passes, the dwellers on BaFin Island might want to consider whether they have helped create a level playing field without enough players for the game. So far, it would appear the significant beneficiaries of BaFin’s persuasion have been the less-than-systemically important dealers in international silver markets.”
Mr. Dizard is also worried about what this might mean for gold markets, “Deutsche Bank will have withdrawn from participating in the ritual of setting a standard price for physical gold. While no wrongdoing by any of the gold-fixing participants has been proven legally, or even, I believe, convincingly demonstrated in econometric modeling, Deutsche apparently came under intense social pressure from its home regulator to withdraw.”
Zero Hedge is of the opinion that Deutsche Bank is not bowing to “social pressure,” but, instead, anticipating additional findings and punishments by the BaFin, the Germen regulatory agency leading the attack on precious metals market manipulation.
So what does this mean for gold and silver prices? There is no doubt that there will be an adjustment period in the precious metal markets. Ideally a more transparent pricing mechanism will be adopted before the three month transition period is up, leading to the first true-market pricing of precious metals in Europe in maybe the last 117 years. True-market pricing should even the playing field for investors of all shapes and sizes around the world.