On Friday, Deutsche Bank agreed to settle privately for antitrust litigation brought against the German bank by traders and investors who accused the company of conspiring to fix gold prices at their expense.
This case holds special interest to me personally, as I was contacted by the prosecuting counsel and gave testimony to some of the dubious trading patterns I have observed over the years participating in the futures market.
The preliminary settlement was filed in New York this week, and consists of a $60M package.
This follows a similar settlement the bank agreed to pay in October of $38M for conspiring to fix silver prices.
It still remains to be seen which classes of traders or investors are eligible to receive compensation from the settlement, and the total payout per individual is unlikely to amount to more than a few hundred dollars.
Further, it should be noted that the combined settlements of $98M represent a tiny fraction of the bank’s $47 billion revenue for 2015. So the settlement will have negligible impact on the company.
Deutsche Bank officially denies wrongdoing. However, the fact that the bank is willing to settle the case is unprecedented in and of itself. Here we have, for the first time, a large multi-national bank agreeing to settle for actions related to manipulation of the precious metals markets.
With this settlement, it is possible that further class action lawsuits could be brought against Deutsche Bank by other parties in coming years.
Four other banks who were also listed as defendants in the case have not agreed to settle yet: Barclays, Bank of Nova Scotia, HSBC, and Societe Generale. Should the case go to trial, a ruling against these banks could result in much harsher penalties than the $98M Deutsche Bank is paying?
Manipulation Theories Go Mainstream
In years past, theories that banks were attempting to manipulate precious metals prices were considered the realm of conspiracy theorists and dismissed by the mainstream media.
However, it is increasingly clear that the precious metals markets represent a special focal point for many institutions, and attempts to manipulate their values are indeed occurring.
It has long been my contention that such manipulation attempts do occur. However, I also believe that such attempts are not more powerful than the market forces itself. Ultimately, the market will win out, and attempts at suppression will fail. This is a lesson from countless examples throughout history: attempts to suppress a given market only result in that market moving higher once the suppression is overwhelmed.
No matter whether the market action on a given day or week is related to manipulative attempts or to legitimate buying and selling, we should still pay attention to where price signals appear on the charts. Both manipulation and legitimate market action do impact the prices at which we must buy and sell physical metal, as well as the revenues and hence market valuations of the companies that mine for the metals in the ground.
Over the long run, we should not want to be involved with the precious metals if they could be manipulated ad infinitum. The fact that we as investors are here means we must have faith that such suppression will fail and the market forces will seek true values.
Over the next few months, we will continue to monitor the settlement and litigation proceedings of these cases, and report on any actions that individual investors should take on the possibility of reparation payments.
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Italians Vote “No” — Signals Establishment Discontent
Early Monday morning, we received reports that Italians have voted “no” on Premier Matteo Renzi’s reform referendum, and further reports that Renzi will resign on Monday.
The outcome is generally seen as representing a victory for “anti-establishment” voters. The reform referendum was strongly backed by Italy’s corporations, banks, and establishment institutions, so the defeat sends a message that is similar in context to Britain’s Brexit vote and Trump’s victory here in the US.
Here we see over the last six months three major western nations delivering strong anti-establishment and anti-globalist messages to their politicians.
While the impact to the precious metals markets have been minor in the overnight Asian trading immediately following the vote, clearly, the “wind of change” that is blowing in various corners of the political world is gaining in momentum…
A Political to Economic Trend?
From a dual political/economic standpoint, we cannot help but wonder: when will even a small fraction of those discontented with the current system (and willing to vote against it in an election) connect the dots and vote against the same system even more tangibly by selling the local currency and buying gold / silver instead? It would not take many of the world’s discontented citizens to simply buy a few ounces of silver or a single ounce of gold for the prices to skyrocket to multiples of the current level.
The timing for this scenario remains speculative still, but we can indeed see shifts in sentiment in front of our eyes. One thing is for sure: political systems and their fiat currencies are intrinsically related… and no amount of manipulation from Deutsche Bank or any other institution will be able to hold back the “voting” of the global currency market when it finally moves in favor of gold.
Christopher Aaron,
Bullion Exchanges Market Analyst
Christopher Aaron has been trading in the commodity and financial markets since the early 2000's. He began his career as an intelligence analyst for the Central Intelligence Agency, where he specialized in the creation and interpretation of pattern-of- life mapping in Afghanistan and Iraq.
Technical analysis shares many similarities with mapping: both are based on the observations of repeating and imbedded patterns in human nature.
His strategy of blending behavioral and technical analysis has helped him and his clients to identify both long-term market cycles and short-term opportunities for profit.
This article is provided as a third party analysis and does not necessarily matches views of Bullion Exchanges and should not be considered as financial advice in any way.
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