Gold Manipulation: What Investors Should Do Now


  • Barclays was recently fined in connection with a London scandal involving gold price manipulation. Promoters of conspiracy theories involving large-scale gold price suppression are claiming vindication.
  • This article explores whether the Barclays scandal does, indeed, vindicate claims of systematic price suppression in gold markets.
  • The article clearly lays out the investment implications of different types of price manipulation for gold investors and for investors in financial markets in general.

For many years, it has been claimed by promoters of the yellow commodity and SPDR Gold Shares (NYSEARCA:GLD) that gold prices are "manipulated." In recent days, these promoters have been claiming "vindication" as a result of events in London that have been widely publicized. First, Barclays was fined 26 million pounds ($43.8 million USD) in connection with a gold price manipulation scandal. Second, Financial Times has recently reported that the sort of shenanigans at the heart of the Barclays case has been "routine" for many years.

Should gold bulls really take solace in this revelation? Do these events really prove that gold prices have been systematically suppressed for decades via "manipulation," as gold promoters often claim? And if gold prices are indeed manipulated, what should current or prospective gold investors do about it? And how does all of this potentially relate to claims of manipulation of the S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) by the Fed?

The Barclays Case: What Kind of Manipulation?

Barclays was fined for failures in internal controls that enabled former trader Daniel James Plunkett to influence or manipulate the setting of gold prices through the traditional daily London "fix" system. According to authorities, Plunkett manipulated the market in order to avoid payment of $3.9 million to a customer under an option contract, boosting his own trading book by $1.75 million.

Do these revelations vindicate the claims of gold promoters that there is systematic manipulation markets to suppress gold prices? This particular case involved a Barclays trader that manipulated the gold price to avoid payment on an option contract. So doesn't this case prove that gold prices can be, and are, in fact, manipulated downward? The answer is both "yes" and "no." It depends what sort of "manipulation" we are talking about.


This article was written by

James A. Kostohryz profile picture
A master portfolio strategist is your asset allocation coach.
James A. Kostohryz has more than twenty years of experience investing and trading virtually every asset class across the globe. After working exclusively with investment institutions for over two decades, Kostohryz now offers a very unique service that is specifically designed for individual investors: Successful Portfolio Strategy, offered through the Seeking Alpha Marketplace.

Kostohryz started his investment career as an analyst at one of the world's largest asset management firms covering sectors as diverse as emerging markets, banking, energy, construction, real estate, metals and mining. Later, Kostohryz became Global Portfolio Strategist and Head of International Investments for a major investment bank.

Kostohryz currently manages JK Investment Consulting, a firm specializing in: 1) Global portfolio strategy; 2) Risk analytics; 3) Macro forecasting; 4) Business cycle analysis; 5) Quantitative analytics. Kostohryz is also founder and CEO of Investor Acumen, a service dedicated to empowering individual investors to achieve their investment goals.

Born in Mexico, Kostohryz grew up in Colombia and South Texas. He graduated with honors from both Stanford University and Harvard Law School. He is a former NCAA and international-class decathlete and has stayed active in a variety of sports. Kostohryz pursues various intellectual interests and is currently writing a book about the impact of culture on economic development.

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