The process by which the price of gold is set could be vulnerable to benchmark manipulation and could have been rigged for up to a decade, according to a leading academic who was among the first to spot the Libor rate rigging.
Professor Rosa Abrantes-Metz of New York University, who is also an advisor to the EU, along with Albert Metz, managing director of Moody’s Investors Services, said in a paper: “The structure of the benchmark is certainly conducive to collusion and manipulation. It is likely that co-operation between participants may be occurring.”
The participants concerned are five banks. HSBC, Barclays, Deutsche, Société Général and the Bank of Nova Scotia set the price of gold twice a day, at 10.30am and at 3pm, via teleconference.
Last month Deutsche Bank said it would withdraw from the process. The other banks made no comment on the move.
Global regulators have added gold, along with several other precious metals, to a growing list of areas of concern over potential benchmark rigging.
In 2008, Abrantes-Metz published her paper Libor Manipulation? which uncovered the Libor rate rigging scandal.