JPMorgan Accused of Gold Price Manipulation

Author: Corey McDowell - Economics Editor

Published: 6 Feb 2020

Last Updated: 8 Jul 2020

Synopsis

The multinational investment bank JPMorgan Chase has been accused of price manipulation in precious metals markets by authorities in the United States. Previously regulators have just limited investigations to six JPMorgan employees, but inside reports have suggested the whole bank itself is now under the spotlight. 

JP Morgan under investigation

Allegations

Although no formal charges have been brought against JPMorgan yet, US prosecutors are constructing a criminal case which could see the bank subject to penalties and fines. Investigators have gone as far as to describe the precious metals trading desk at the bank as a “criminal enterprise” and a “racketeering operation” spanning over a decade. This is not the first time JPMorgan have been under investigation for market manipulation – they were found guilty of price rigging in currency exchange markets in 2015.

The precious metals in question include gold, silver, platinum and palladium traded between March 2008 and August 2016. JPMorgan traders are suspected of manipulating the price of precious metal by placing bogus orders with the intention of cancelling them. This has the effect of setting future prices, which can influence investor behaviour. Market participants could therefore have been misled and tricked by this insider activity by JPMorgan employees. This has led to regulators to suspect the bank of conducting illegal activity, accusing them with: 

“conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity” 

Spoofing of Gold

This “spoofing” of the precious metals market should come as no surprise to most clued-in investors and analysts; this activity is similar to “painting the tape” tactics used by insider investors to create artificial prices. It can be very difficult to prove though, which leads to regulators to use the slippery word “conspiracy” to lower the burden of proof. Notwithstanding, if these accusations are proven by US authorities, then what impact did JPMorgan’s activities have on the prices of gold? Are large financial institutions attempting to misled ordinary investors on the prices of precious metals? The educated investor would do well to spot this type of unethical behaviour in markets and not get sucked into artificial pricing.

Further Reading

You may be interested in exploring more articles in our precious metal and coin news section of the website. 

This guide and its content is copyright of Chard (1964) Ltd - © Chard (1964) Ltd 2020. All rights reserved. Any redistribution or reproduction of part or all of the contents in any form is prohibited.

We are not financial advisers and we would always recommend that you consult with one prior to making any investment decision.

You can read more about copyright or our advice disclaimer on these links.