The conspiracy theorists may have been right…
Deutsche Bank just agreed to settle two lawsuits that alleged the German bank illegally conspired to manipulate gold and silver prices at the expense of investors.
The plaintiffs accused Deutsche Bank of conspiring with Bank of Nova Scotia, Barclays, HSBC, and Societe Generale to manipulate prices of gold, gold futures and options, and gold derivatives.
They also accused Deutsche Bank, HSBC, and Scotiabank of a similar conspiracy of manipulating roughly $30 billion of silver and silver financial instruments annually.
The terms of the settlement were not disclosed. But it will include a monetary payment to the plaintiff.
Of course, settlement is not definitive proof that Deutsche Bank did, in fact, conspire to manipulate gold and silver prices. However, I think we can assume that if the German bank had nothing to hide, there would have been no settlement.
And as I mentioned to you the other day, it does make sense for a bank like Deutsche to want to manipulate gold and silver prices.
That’s because — in addition to directly profiting from short-term trading — gold and silver are in direct competition with these banks’ products: fiat-currencies and other related instruments.
I imagine the settlement is something Deutsche will want to sweep under the rug as quickly and as quietly as possible. Because there will no doubt be similar lawsuits filed in the settlement’s wake.
Toronto-based Sotos LLP launched a class-action lawsuit seeking $1 billion in damages back in December in the Ontario Superior Court of Justice. Its statement of claim says:
This action arises from a conspiracy among the defendants to fix, raise, decrease, maintain, stabilize, control, or enhance unreasonably the price of gold and gold-related investment instruments, which include, without limitation: gold bullion and gold bullion coins, gold futures, shares of gold-focused ETFs, units of gold-focused mutual funds, gold certificates, gold leases, over-the-counter gold spot or forward transactions, and options on any of the foregoing (“Gold Market Instruments”) and to fix, raise, decrease, maintain, stabilize, control, or enhance unreasonably bid-ask spreads used by market participants in the gold market.
I doubt that any of these lawsuits will have any short-term effects on gold or silver prices — or on Deutsche Bank over the long term.
They’ve figured out that “too big to fail” also means “above the law.” And I expect nothing more than a slap on the wrist for Deutsche.
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Right now, I’m actually looking to go long on oil as a short-term trade. Crude prices are reeling as the entire world reacts to the failed production freeze deal at the summit in Doha.
The failed talks were featured on every major news outlet last night. And I expect an over-reaction in the oil market today.
I’ll be looking to pick up mid- to large-cap oil producers and refiners today on any major dips, with companies like Marathon Petroleum (NYSE: MPC), HollyFrontier (NYSE: HFC), and Exxon (NYSE: XOM) on my radar.
I’ll also be watching commodity-based currencies like the Canadian dollar, the Australian dollar, and the Mexican peso today to buy on any major dips.
Go against the grain,
Luke Burgess
Energy and Capital
