More on the Barclays gold-fixing fine

May 23 2014, 08:02 ET

• Needing a "mini puke to $1,558 for fixing," Barclays trader (now ex-trader) Daniel Plunkett got it, nailing a bank client for $3.9M on a derivatives contract. Thus started the investigation into the bank's manipulation of the gold fix for which it was fined $44M today. The former trader also was handed down a fine and a banning from the industry.
• Plunkett's actions that in 2012 came only one day after Barclays was fined a £290M over Libor manipulation which eventually led to the exit of CEO Bob Diamond.
• Today's action brings further questions over the future of the decades-old gold fix. Deutsche has already resigned from the small group of lenders involved in the process. "If [the gold-fixing banks] want to continue to operate the fix in any way like they're doing they will need to be a lot more transparent about what's going on," says finance professor Brian Lucey.
• http://seekingalpha.com/news/1768643-more-on-the-barclays-gold-fixing-fine?uprof=46

The fix is a reference point and its abolition would have little effect on prices traded during the day. For those who think there is the chance of some big bounce as a result, dream on.

The fix is a reference point and its abolition would have little effect on prices traded during the day. For those who think there is the chance of some big bounce as a result, dream on.

It wasn't just some input on prices, there was at least one identified attempt to move the market. FT article. Requires a login, though a few articles per month can be read for free.

http://www.ft.com/cms/s/0/08cafa70-e24f-11e3-a829-00144feabdc0.html#ixzz32Z7u25zP

The FCA said Mr Plunkett had manipulated the market by placing, withdrawing and replacing a large sell order for gold bars in an attempt to push down the price in what the trader called a “mini puke”.

As a result, the bank was not obliged to make a £2.3m payment to the customer – who was later compensated – under an option contract and Mr Plunkett boosted his trading book by £1m. He has now been banned from working in the regulated sector and fined £95,600.

The fix is a reference point and its abolition would have little effect on prices traded during the day. For those who think there is the chance of some big bounce as a result, dream on.

It wasn't just some input on prices, there was at least one identified attempt to move the market. FT article. Requires a login, though a few articles per month can be read for free.

http://www.ft.com/cms/s/0/08cafa70-e24f-11e3-a829-00144feabdc0.html#ixzz32Z7u25zP

The FCA said Mr Plunkett had manipulated the market by placing, withdrawing and replacing a large sell order for gold bars in an attempt to push down the price in what the trader called a “mini puke”.

As a result, the bank was not obliged to make a £2.3m payment to the customer – who was later compensated – under an option contract and Mr Plunkett boosted his trading book by £1m. He has now been banned from working in the regulated sector and fined £95,600.

These tactics can only induce short-term effects on prices, at most a few days, it's a completely different situation from the LIBOR.

On the other hand, gold prices are being manipulated big style by central banks.