Is Deutsche Bank gold manipulation the main scam or just a sideshow?

NEW YORK (PNN) - April 18, 2016 - For years now, the easiest way to finesse a debate over whether precious metals markets are manipulated has been to say, “well, if they’re not manipulated they’re the only market that isn’t.”

That was unsatisfying, though, because as the big banks got caught scamming their customers on interest rates, mortgage bonds, Forex and commodities trades, those markets began to operate more-or-less honestly. Meanwhile, gold and silver kept right on acting strangely, for instance plunging in the middle of the night on no news but massive futures volume, to the detriment of honest investors and traders who naively bet their capital on fundamentals. The (already huge) amount of money thus stolen from gold bugs kept rising. So it is with relief that fans of honest markets have greeted the news that at least one kind of precious metals manipulation has been exposed.

Deutsche Bank AG has reached settlements in lawsuits over allegations it manipulated gold and silver prices, lawyers for traders of the commodities said in court filings.

Attorneys for futures contract traders in two private lawsuits said in letters filed Wednesday and Thursday in Manhattan federal court that the bank has executed term sheets and is negotiating final details for the accords.

The German financial firm also agreed to help the plaintiffs pursue similar claims against other banks as part of the settlements, according to the letters. Vincent Briganti and Robert Eisler, attorneys for traders in the silver-fixing lawsuit, said Deutsche Bank will turn over instant messages and other communications to help further their case. Financial terms of the settlements weren’t disclosed.

“In addition to valuable monetary consideration to be paid into a settlement fund, the term sheet also provides for other valuable consideration such as provisions requiring Deutsche Bank’s cooperation in pursuing claims against the remaining defendants,” attorneys Daniel Brockett and Merrill Davidoff said in their letter Thursday in the gold-fixing lawsuit.

Silver and gold futures traders sued groups of banks in 2014, alleging they rigged prices for the precious metals and their derivatives. Silver traders brought claims against Deutsche Bank, HSBC Holdings Plc, Bank of Nova Scotia, and UBS AG. Gold traders additionally sued Barclays Plc and Societe Generale SA.

The traders alleged the banks abused their positions of controlling daily silver and gold fixes to reap illegitimate profits from trading and hurting other investors in those markets who use the benchmark in billions of dollars of transactions, according to versions of the complaints filed in 2015. Of those banks, only Deutsche Bank has reached a settlement.

Amanda Williams, a spokeswoman for Deutsche Bank, declined to comment on either accord. Rick Roth, a spokesman for Scotiabank, the operating name for the Bank of Nova Scotia, and HSBC spokesman Robert Sherman also declined to comment. Representatives from UBS, Barclays, and Societe Generale didn’t immediately respond to requests for comment.

Deutsche Bank’s plea is of course just the beginning of the story. It will apparently name its co-conspirators, while providing details on how the scam was run. This will be interesting and amusing, especially at a time when those same banks are also in the news for falling earnings, rising layoffs, and exploding loan loss reserves.

But is this gaming of the London precious metals fix the same thing as - or even tangentially related to - the main manipulation of the gold price, which is the practice of central banks “lending” their gold to big commercial banks, which then sell that gold on the open market to depress the price? These seem to be two different frauds, and if only the first comes to light while the second continues unimpeded, there’s no reason to expect precious metals to start trading rationally - which is to say in line with fundamentals like soaring global debt, ever-increasing money creation, and general geopolitical and economic instability. At least not until Western central banks run out of gold.

The silver case is In re: London Silver Fixing Ltd. Antitrust Litigation, 1:14-md-02573. The gold case is In re: Commodity Exchange, Inc. Gold Futures and Options Trading Litigation, 14-md-2548, U.S. District Court, Southern District of New York (Manhattan).