By Rosa M. Abrantes-Metz
Authorities around the world are gradually piecing together a shocking picture of how banks have manipulated benchmarks that influence the price of everything frommortgage loans to foreign currencies.
Another area deserves their scrutiny: gold and silver.
In recent weeks, Bloomberg News and others have reported on concerns, among market participants and regulators, that the process for establishing the price of gold may lend itself to insider trading and otherforms of unfair dealing. The available evidence strongly suggests manipulation and, given the structure of the market, possibly collusion.
The price-setting mechanism, known as the fixing, provides an easy vehicle for manipulation. Twice every business day in London, representatives of five banks and some select clients participate in a phone call in which offers to buy and sell gold are put forward. These calls determine the morningand afternoon gold fixings, which serve as the benchmark for trillions of dollars in transactions around the world. Silver fixings work similarly, with only three banks involved. ...