CFTC investigates possible manipulation in the fixing of gold and silver prices

CFTC investigates possible manipulation in the fixing of gold and silver prices

 According to a number of newspaper reports, the US regulatory authority CFTC has launched an investigation to determine whether the fixing of gold and silver prices in London has been subject to manipulation. Although the investigation is still in its very early stages, it is reminiscent of the Libor scandal. A spokesperson from the London Bullion Market Association (LBMA), which sets the standards for gold and silver trading in London, vehemently denied the allegations, saying that price fixing is conducted to a very great extent on the basis of supply and demand, and that it is an entirely transparent process. What is more, futures trading in London and New York continues during the price fixing process, which could give rise to arbitrage opportunities should there be any deviations – advantage could immediately be taken of such opportunities, especially on the highly liquid gold market. The CFTC had investigated possible manipulation on the silver market back in 2008, but so far has uncovered no evidence of it. 
In South Africa, power supply problems in recent days – a power transformer of state energy provider Eskom had caught fire and therefore had to be taken offline – have resulted in gold mining production being hampered. Several mines, accounting in all for 20% of South African gold production, had to be closed temporarily as a consequence. In some cases, the mining producers concerned have meanwhile managed to reinstate the power supply using their own generators. This illustrates the latent supply problems that exist in what was formerly the world’s largest gold producing country.