Gold: In a fix, Mr Bond

COMMODITY prices are not just for buyers and sellers of the physical stuff. They are also the basis of derivative markets—futures contracts, options, and combinations of these and other financial instruments—which can be far larger. A twitch in the “benchmark” price can mean big shifts in the value of derivatives, and profits for the prescient.People unhappy with the way the world gold market works suspect that more than prescience may be involved. In a class-action lawsuit filed this week, Kevin Maher, a New York-based investor in the gold and derivative markets, is suing the five banks which set the benchmark—Deutsche, Barclays, Nova Scotia, Société Générale and HSBC—for collusion. Those banks that have commented say they will defend the suit vigorously.Another bit of bad news for the gold market comes from a forthcoming paper by Rosa Abrantes-Metz, of New York University’s Stern School of Business, and her husband Albert Metz, a ratings-agency chief (writing in a personal capacity). This identifies a puzzling number of large downward price movements in the run-up to the afternoon “fix”: a conference call, typically ten minutes long, when the banks exchange information and decide on…

Link to article:|fec

Leave a Reply

Your email address will not be published. Required fields are marked *