This £26 million fine is of course a drop in the ocean when compared to fortunes made over the years by the price manipulators. But the fine is big enough to start drawing mainstream media attention to the skulduggery going on in gold.
An article by Bloomberg is particularly revealing, relying as it does on the FCA’s document that reports its investigation of this one particular gold price manipulation by Barclays Bank. It makes clear how the paper market is being used to manipulate the price of physical gold, which ignores the reality that the supply of physical gold is limited, while the supply of paper commitments to deliver gold is essentially unlimited.
This means that gold - and silver too - operates on a fractional reserve basis. In other words, there are far more commitments to deliver physical metal than there is physical metal available, so when the music stops - which it always does eventually - the result will be a systemic failure as occurred in 2008 when Lehman Brothers was unable to meet all of its derivative commitments.
The important point is that the FCA report illustrates how the Barclays “exotic options” trader, Daniel Plunkett, twice conjured up out of thin air up to 150 LBMA good delivery bars that he did not own (then valued at $93.5 million) in order to force the price of gold lower during the fixing process. He then covered this short position by ‘buying back’ these non-existent bars from the trader at Barclays spot metal desk.
- Source, James Turk via King World News