WEKO, the Swiss competition watchdog, has just launched an investigation to determine whether several major banks have colluded to rig the precious metals market, including the pricing of gold, silver, platinum and palladium.
Since 2013, Switzerland’s Financial Regulatory Authority, known as Bafin, has scrutinized global precious metals trading. Back then, the organization suspected Deutsche Bank of manipulating gold and silver benchmarks. Even though the investigation “went away,” manipulation accusations did not.
WEKO has stated that it is investigating UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui into whether they conspired to set bid/ask spreads. WEKO stated that it “has indications that possible prohibited competitive agreements in the trading of precious metals were agreed among the banks mentioned.”
The group also indicated that it would conclude its investigation in either 2016 or 2017 and that it could add more banks to its list if it has cause for suspicion.
The move comes at a time when European Commission and United States authorities are investigating at least 10 major banks for possibly rigging precious metals markets.
Brian Lucey, professor of finance at the School of Business, Trinity College Dublin, opines that the precious market price manipulations likely will not tank the industry. “The question is not if individuals, or groups of individuals are collaborating to rig the game for themselves, the question is if this has any material effect. I’m not convinced collusive behavior will have a meaningful effect micro-economically to the structure of gold trading around the world.”
What the actual effect is of the alleged manipulation in prices remains to be seen.