New criminal probe over banks’ ‘rigging’ of precious metals market

Barclays, HSBC and Deutsche Bank are among at least 10 international banks being investigated by the US Department of Justice for alleged rigging of the precious metal market, it emerged yesterday.

HSBC revealed in its annual report, published yesterday, that the DoJ has asked it to submit documents relating to a criminal anti-trust investigation into precious metals. It also said that the Commodities Future Trading Commission had subpoenaed HSBC Bank USA.

DoJ prosecutors are investigating the London price setting of gold, silver, platinum and palladium. Other banks reported to be under investigation include Bank of Nova Scotia, Credit Suisse, Goldman Sachs, JPMorgan Chase, Société Générale, Standard Bank, and UBS. HSBC said that the investigations were “at an early stage”. Other banks declined to comment although Barclays will have to reveal any new probe when it reports its annual results next week.

The latest inquiry comes after many of the same banks have paid out billions of pounds in fines and settlements over rigging of both the Libor and forex markets. HSBC, Barclays and Deutsche are among banks being sued in the US civil courts over claims that they criminally manipulated precious metal markets for years.

The Swiss regulator, Finma, said last year that it seen a “clear attempt to manipulate fixes in the precious metal market” by UBS, although the settlement was not made public.

But wider investigations by the FCA, Finma and the German regulator Bafin, seem to have stalled recently. Until last year gold, silver, platinum and palladium prices were set in a daily or twice daily conference between a small number of banks. But when allegations of price fixing first emerged, those systems were scrapped. Prices are now set by various electronic market participants.

ICE Benchmark Administration will run an electronic gold price benchmark from 20 March, to replace the London gold fix. Thomson Reuters runs the silver daily fixes and the London Metal Exchange the platinum and palladium fixes.

The daily fixes are used both in the physical markets for precious metals by jewellers, and for financial products such as exchange traded funds. While not as large as the Libor or forex markets, the level of outstanding contracts across the markets is in excess of $100bn (£65bn).