How to Protect Yourself from DB’s “Gold and Silver Fix”

Deutsche Bank AG (NYSE:DB) just can’t seem to get out of its own way.

Having been in trouble with the New York Fed for years for a series of serious regulatory problems, the European giant just admitted that it engaged in a conspiracy to rig gold and silver prices with HSBC and ScotiaBank.  Silver and gold futures traders sued them alleging that the three banks, which dominate the silver market, used their power to rig prices in the precious metals and their derivatives.  Silver traders sued DB, HSBC, Bank of Nova Scotia and UBS while gold traders added Barclays and Societe Generale.

I’m shocked, simply shocked to learn that people were gambling at Rick’s Café.

DB is the only bank that has settled these claims so far.  But it didn’t just admit it broke the law.  Proving the adage that there is no honor among thieves, DB also offered to turn over evidence on its co-conspirators who have not settled the case.

If you can’t trust your fellow thieves, there’s no justice in the world.

And for investors, of course, it’s become increasingly clear that you can’t trust the markets.

Incompetent Bureaucrats Are Destroying the Markets for the Average Investor

This settlement is a major black eye for regulators.  In September 2013, the CFTC closed a five-year investigation into allegations that big banks were manipulating gold and silver prices and said it found no evidence to support the claims.  And people wonder how Madoff got away with his Ponzi scheme for so long?

The reason so much fraud goes unpunished is because regulators are unqualified to understand the markets that they are regulating. In the case of Deutsche Bank, which as I’ve repeatedly warned holds enough derivatives on its books to blow up the world, regulators repeatedly flagged problems but failed to either require them to be fixed or to rein in the bank’s operations in order to protect investors and the system. This is simply inexcusable.

But the real story is that our government lacks the wherewithal to enforce its own laws. The highly concentrated nature of risk in the financial system is heightened by the inability of regulators to rein in institutions’ bad behavior. Some of the world’s largest banks engaged in serial violations of the law and paid large fines while receiving multiple waivers protecting their banking licenses while virtually none of the corporate executives who committed the deeds in question were punished criminally. Deutsche Bank’s ability to keep regulators at bay is just one example of the corruption of markets.

Sometimes it’s just better to settle (via Zerohedge)
Click to enlarge.

But more important for investors is what effect this will have on the gold and silver markets.

Obviously the banks are aware their every move is being watched and are trying to clean up their acts.  But one of the problems in financial institutions is that compliance departments, like regulators, are peopled not by the best and the brightest but by the dumb and dumbest among us.  Compliance officers tend to focus on trivia while allowing big problems to fester right below their noses.

If DB really has the goods on its co-conspirators and shares them with plaintiffs’ lawyers and regulators, maybe things will get cleaned up. But along with that will likely come lower market liquidity, which contributes to price opacity rather than transparency.

It is difficult for investors to protect themselves in a rigged market.

The best thing you can do when buying gold and silver is check multiple price sources to ensure you are receiving the best available price.  The sad fact is that all markets are rigged to some extent, but checking prices to keep dealers honest is the first step to making sure that you will not be another victim of corrupt banks and their incompetent regulators.



18 Responses to “How to Protect Yourself from DB’s “Gold and Silver Fix””

  1. That’s it? Protect yourself by checking prices? No advice on what the rigging was? effect on future prices? Where’s gold headed? From whom to buy? A useful article is needed to good some solid advice on ‘protection’ please.

  2. I agree that the article needs to be supplemented with data. What did the banks do, raise,lowere or frezze gold and silver prices. Is it still going on? Should we not be in gold and silver markets. What can we do to protect ourselves from the thieves?

  3. Banks are keeping the price of gold and silver down to keep the dollar as the reserve currency.
    This has been going on for many moons. Prices are fixed and enforced with massive naked shorting on the COMEX. See GATA website.

  4. 1-I read the price manipulation was only done on the short-term for high-frequency trading so didn’t affect the long-term price of gold/silver.

    2-IMHO, the regulators aren’t watching the “rigged” metals market because the US government is behind the “rigging” to protect the US dollar. They’re “asking” JPM/Citi to keep the prices low. Just my speculation 🙂
    The true “price discovery” will come soon enough when China puts more influence in setting the price away from the “rigged” futures market.

  5. Prices are set by banks as per above and enforced by massive shorting on the COMEX. This has been going on for years and the government doesn’t want to investigate because it has been the way the dollar stays propped up and keeps it as the reserve currency. This allows the government
    to print billions of dollars as fiat money. Nothing new here. See GATA website.

  6. Seeking Alpha suggests $6-10 Billion Euro Equity raise in anticipated, thus the low P/Bk. With that the downside is somewhat baked in. What is the true catalyst globally to cause a derivative debacle?

    On another front, I am amazed with BOJ NIRP game. However, since they own their own bonds, don’t they make artificial inflation oweing themselves nothing in interest and having to finance less each new BOJ offering?

    Educate me on the aspect of financial gamemenship? I feel like all governments are in over their head and have to play this game otherwise it’s like the biggest Bernie Madoff scam in the history of man.

  7. Michael, as it really really come to this cesspool of greed and incompetence with bankers and shareholders to leave retired people like myself with little knowledge of investments or how to save our situation we are left in, out in the cold

  8. Dollar priced metals didn’t miss a beat as they are still doing the almost nightly hits with naked shorts. Mostly in the 2-3 a.m. time frame when almost no volume is there. Some of the moves are spectacular, dropping 3 to 4% in minutes. Not sticking too much lately as the price has been coming back up. I’m sure JPM has their fingerprints all over it.

  9. Ted Butler’s got the low down on the manipulation problem. Everybodyelse is just comming onboard since Jan. ’16 price rise.
    I saw a picture of Ted standing outside of COMEX wherehouse counting palets of Silver shipments, to justify his research.
    He sends all of his findings of deliterious manipulations to CEO of JPM, with no responces; unlikly if he where innocent.
    I don’t think liquidation will be a problem; When the manipulators feel the fire they’ll be alot of buying and selling. And prices will hit the roof; of Silver in any form. Silver is the market to be in. Physical for later on when things get out of control. Options on Silver based equities and ETF’s for now.
    China’s got the Gold and I think there manipulation will be worst of all. Gold/Silver ratio will colapse. Silver will out perform Gold; as it has in the past.

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