With its agreement to pay a fine of $38 million, Deutsche Bank provided final vindication to many people who buy gold and silver. 1 There has long been concern over the way silver prices sometimes do not move the way trends would predict, leading to claims of market manipulation.
Lawsuits Bring Settlements
A number of lawsuits were filed in the recent case of silver price fixing, and the Deutsche Bank settlement was filed in a Manhattan federal court to settle U.S. claims. However, the final settlement is not the end of this case. Prosecutors also gained an agreement that Deutsche Bank personnel would cooperate in further investigation of other banks.
The cooperation will include turning over a trove of electronic communications, including e-mails, instant messages, and phone calls. According to the attorneys in the case, this additional evidence is expected to result in significant additional settlements by the banks involved.
Big Banks Collude to Manipulate Markets
Investigators have targeted a number of other players, including HSBC, Barclays Plc, and Societe Generale SA, UBS and ScotiaBank. 2 The basic allegations include the charge that the traders colluded on setting the price of settling large numbers of silver futures contracts.
According to prosecutors, these banks were members of the The London Silver Market Fixing Ltd. Following a practice known by all silver traders and going back to the 19th century, members met each day of trading at noon. Members meet for about 15 minutes, and then publish prices that affect trading globally.
Preventative of Further Fixing?
The conspiracy of these banks included publishing false prices while sharing confidential market data among the group. The lawsuits filed claim these actions date back to January of 2007.The suppressed price fixes and information allowed the participants to create an unfair advantage that netted tens of millions of dollars in illicit profits. The London silver market alone trades more than $1.6 trillion in the white metal each year.
The markets for precious metals have turned bullish over the past year. Long-term traders and investors in gold and silver generally hope that these sorts of allegations and market pressures will prevent any similar significant suppression of gold and silver prices over the long-term.