The world price of gold is determined by just five banks. Now the Supervisory authorities looking into this opaque pricing – and rightly so. But it's not just the checking.
It's just some kind of "Groundhog day". September 12, 1919 in the city of London is defined by the world reference gold price.
Both then and now involved a total of five banks. Yes, and the fixing (the process of determining the price per ounce of gold), in principle, remained the same as before. At 10.30 and 15.00 GMT banks impose sentences (their own and their customers) for the purchase price and the sale of the yellow metal in the trading system and in the next ten minutes negotiating a price.
For the uninitiated, the fixing takes place "completely transparent", says Commerzbank analyst, Eugen Weinberg. The price of gold has a big impact on trading on this tool around the world determines the prices on coins, raw gold from the mines and on the jewelry. Investors and Central banks assess through gold reserves. In addition, the gold affects the derivatives markets, which also traded yellow metal, first and foremost, on the new York stock exchange Comex.
The fact that in determining the price of gold is attended only five banks, and they do this completely out of control behind closed doors, have forced supervisors now, almost a century later, prick our ears. "This is one of the most bizarre methods of determining prices for a product that I have ever seen," said Rosa Abrantes-Metz in an interview with Bloomberg. Professor, school of business and Leonard stern was the initiator of check about the manipulation of London interbank offered rates (LIBOR) in 2012. What you can do with interest rates, can be done everywhere, where prices are determined by banks, which focus on the markets, including currency. The U.S. Commission on commodity futures trading (CFTC), similar to the British authority FCA and now the German financial Supervisory authority BaFin check all of these processes.
The fact that gold is something "strange", drew the attention of Dimitri speck. Analyst Staedel Hanseatic explored the millions of courses and found that in the last 20 years occurred frequently collapses in the prices of the yellow metal before fixing in London. In addition, the expert pointed to the fact that trading volumes on Comex rise only after the results of the fixing, i.e. when the price is already determined. Andrew Kaminski and Richard Heaney, however, came to the opposite conclusion. According to both professors Perth University (Australia), "the increase in deals on gold was observed directly after the start of fixing".
All of this suggests that out of the five banks involved in the fix, have the leak of information about the future price of the yellow metal. Kaminski Heaney and analyzed data for the period from 2007 to 2012 on the gold derivatives "predicted" the direction of fixing. Between 14.59 15.00 direction, and only 50 per cent of the cases coincided with the results of the fixing, declared in 15.10. Starting with 15.01, the accuracy of "predictions" reached nearly 70 percent, and in the remaining five minutes grew to 80 percent.
"Traders involved in determining the rates, have the knowledge that for even a short time, but not others," says Thorsten Polleit, economist of Degussa company, specializing in the gold trade.
Until 2012 he worked at the British Bank Barclays, which since 2004 takes part in the fixing (after "five" left Rothschild, co-founder). Four other Bank-the co-founder were previously absorbed by larger banks or sold their places in the "five". Today in the fix involves Barclays, HSBC, Bank of Nova Scotia, Societe Generale and Deutsche Bank.
That all the banks when fixing adhere to high moral standards, there is considerable doubt – at least since the scandal over LIBOR. The legend of wall street's Henry Kaufman, until 1988 worked at Salomon Brothers, sees the reason for this is that investment banks were transformed from partnerships into joint stock companies whose shareholders are no longer engaged in operational activities. "Roughly speaking, at stake was their own skin – they carried for their actions unlimited liability," says Kaufman. And hired managers, he said, are taking too large risks and are more prone to all kinds of tricks. If something goes wrong, they, of course, have to leave, but often with a "Golden parachute".
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