As Details of Gold Manipulation Come To Light, Price Action Makes More Sense

If you’re following the gold market, you probably heard that the FCA (Financial Conduct Authority) fined Barclays  and one of its traders in relation to trading at the daily gold fix.   Barclays was fined for:

“failing to adequately manage conflicts of interest between itself and its customers as well as systems and controls failings, in relation to the Gold Fixing. These failures continued from 2004 to 2013.”

The trader was fined because he:

“exploited the weaknesses in Barclays’ systems and controls to seek to influence that day’s 3:00 p.m. Gold Fixing and thereby profited at a customer’s expense.”

Specifically, the trader was managing a digital options position.   A digital option is one that pays off based on a binary scenario: in this case, if the PM fix in gold was over a specific price ($ 1,558.96) on a specific date (June 28th, 2012), then Barclays would owe a payment to the customer on the other side of the trade.   The trader managing the position was also participating in the daily gold fixing, and he did his best to make sure that the PM gold fix was below the trigger price.  He succeeded in his efforts to get the fix below the level.

What’s especially interesting, especially coming from the point of view of yours truly, who has been one of the leading voices in calling for an investigation into the upward manipulation of gold prices, is that we can use the information in the FCA’s notice to put together an explanation of the strange price movements seen in gold over the last decade.  Let’s look at the details, all straight from the FCA notice.  Here are the facts:

1) Barclays joined the Gold Fixing on 7 June 2004.   On June 7th, 2004, gold was trading around $ 392 per ounce.

2) The event in the FCA complaint occurred on June 28th, 2012.

3) “During the Relevant Period, Barclays’ systems and controls in relation to the Gold Fixing failed to: (i) provide staff with appropriate guidance or training with respect to their obligations concerning their participation in the Gold Fixing; and (ii) have measures in place that would adequately allow supervisors to monitor traders’ activities during the Gold Fixing”

“Relevant Period” means 7 June 2004 to 21 March 2013

4)  Barclays began correcting their internal controls in November, 2012, formally adopted new procedures in February, 2013, and firmly implemented them on March 21st, 2013.  (pages 13, 14 of the FCA Notice)

5) On March 21st, 2013, gold was trading around $ 1615 /ounce.

Suddenly things are starting to make sense, right?   Starting in 2004, gold took off on a vicious run, thanks to the manipulation at the hands of Barclays.   Gold rose from under $ 400/oz to more than $ 1600/oz.  a THREE HUNDRED PERCENT gain, resulting from this manipulative behavior (chart via Monex.com).

 

Almost a DECADE of Manipulation

Almost a DECADE of Manipulation

 

Late in 2012, Barclays began to address their traders’ manipulative behavior, and the results are instantly visible (Stockcharts.com):

 

Barclays' Gold Manipulation Starts To Die

Barclays’ Gold Manipulation Starts To Die

When Barclays’ anti-manipulative policies were firmly in place, well – if you’ve been watching gold prices for the last year, I don’t need to tell you what happened next.   Without their upward manipulative actions, it was timmmmmberrrrrrrrr (Stockcharts.com):

 

 

Without Barclays' upward manipulation, it was game over for gold

Without Barclays’ upward manipulation, it was game over for gold

 

 

Putting it all together on the 10 year Monex.com gold chart:

 

 

A Visual History of Barclay's Gold Manipulation

A Visual History of Barclay’s Gold Manipulation

 

The data and facts above clearly illustrate what can happen when a manipulative force is involved in the gold market, and what happens once that evil force is removed.   The charts speak for themselves.   Hopefully, in the near future the regulators will continue to crack down on more manipulators, as we continue to see daily charts that speak to a suspicious force still out there, as evidenced in the chart I snapped just yesterday: 5/22/14.  The price action is so sharp, you can barely see it on the side of the chart.

 

they're still out there...

they’re still out there…

 

Related:

FCA Summary

FCA Final Notice for Barclays

FCA Final Notice for Daniel Plunkett

One Month of Gold Manipulation, In Pictures

Concrete Evidence of Gold Manipulation

Is Anyone Calling the Regulators About Today’s Blatant Gold Manipulation?

-KD

no positions: $GLD $PHYS $SLV $PSLV

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