In the wake of a court ruling from a U.S. District Court judge in New York, the Bank of Nova Scotia (BNS) must now turn over internal correspondence—including electronic communications—between its employees in regard to the old gold fix. The decision allows the years-long case against the bank for engaging in price manipulation as a member of the erstwhile London Gold Fix to move forward.
In addition to the Bank of Nova Scotia (also known as Scotiabank), the other members of the fix are also implicated in the suit: Barclays, Deutsche Bank, HSBC, and Société Générale.
This may well prove to be a case where the presence of smoke leads to fire. In April, after it had already vacated its seat on the gold fix due to heavy outside pressure, Deutsche Bank actually admitted to having manipulated gold prices.
In some sense, each of the fixing members may be considered accessories to such price manipulation given the structure and nature of the fix itself. This is why the price-setting mechanisms for both gold and silver are being revamped.
The Bank of Nova Scotia has been a participant in the gold fix since 2004.
A group of investors brought the lawsuit against the banks alleging price manipulation. Now, due to the judge's ruling, a period of discovery will take place over the next 18 months to two years in which internal communications of Scotiabank employees will be scrutinized for clues about what went on during the twice-daily fix.
“We’re going to get a full picture into what was communicated, what was going on during the gold fix, on a daily basis, throughout the class period," a lawyer for the plaintiffs, Daniel Brockett, told reporters.
The "class period" is limited to the six years prior to 2012.
"They can’t avoid producing that to us now,” Brockett explained. “So we’ll be able to tell from the communications whether the traders were actually agreeing to manipulate the gold fix price for their own personal gain, which is what we allege.”
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Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.